Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — TRANSPORT

London Underground

Mr. Dowd: To ask the Secretary of State for Transport what current proposals his Department has to extend the London underground system into south London and beyond.

The Minister for Transport in London (Mr. Steve Norris): Primary responsibility for developing the underground network rests with London Underground Ltd. A substantial part of the Jubilee line extension currently under construction runs south of the river and London Underground has plans for a southern extension of the east London line.

Mr. Dowd: I thank the Minister for that response. I realise that London Underground Ltd. will be the primary body involved in any work. I welcome the extension of the Jubilee line and the docklands light railway, but does the hon. Gentleman appreciate that they do no more than touch the periphery of south-east London? We need a major extension through south-east London and on to Bromley and/or Croydon. The commercial, social and, in these days, environmental case for that is overwhelming.
Will the hon. Gentleman's Department do all that it can to encourage London Underground to undertake detailed feasibility and preparatory work to determine what the options might be? We need an end to the present unsatisfactory situation in which almost 2 million people in south-east London are denied access to the most important strategic transport network in the capital.

Mr. Norris: As the hon. Gentleman knows, a study is currently under way, involving the five south London boroughs and London Underground, of precisely the problem to which he has referred. I accept what he says about the absence of a tube line in that area of south London, not least because I live there and am acutely aware of it. We rely on buses and on Network SouthEast, but there is no doubt that the tube would be a great addition.
As I think the hon. Gentleman will appreciate, a tube line would be an extraordinarily expensive proposition, so it would not be reasonable of me to suggest that there might be an immediate prospect of a transport improvement of that sort being delivered. As I said, however, work is being done on examining the feasibility and the benefits to which the hon. Gentleman referred and I will keep a careful watch over that.

Mr. Evennett: Although I welcome my hon. Friend's comments on proposals to improve public transport in south-east London, may I urge him not to forget the needs of the motorist and the travelling public who want to travel by car? The east London river crossing must be part of any overall improvement in south-east London. Although people living in Erith, Crayford, Bexley and other such areas want an improvement in public transport, they also need more crossing points on the river so that they can use their cars.

Mr. Norris: One of the improvements south of the river is £800 million-worth of new Networker trains on the Kent link line, which benefit my hon. Friend's constituents and others in that area. His comment about the need for more river crossings is well understood; however, he knows that many of the proposals for crossings have encountered difficulties, not least with local authorities such as his local authority in Bexley. For example, the proposal for a road


from the A13 through to the A2016 was not only specifically precluded from the original Oxleas wood public inquiry, but would—as my hon. Friend's local authority has pointed out—cause concern about localised traffic, not least in the Bexley area.

Mr. Keith Hill: On the subject of improvements to underground services south of the river, is the Minister aware that members of the all-party Northern line group recently visited the ABB and GEC Alsthom factories at Derby and Preston, both of which are champing at the bit to supply new rolling stock for the Northern line—as, I am sure, are their overseas competitors?
Will the hon. Gentleman reassure the House that the summer recess will be used as an opportunity not for delay but for the speediest possible consideration and favourable conclusion to that urgently needed improvement to the Northern line, both north and south of the river?

Mr. Norris: I welcome the hon. Gentleman's conversion to the private finance initiative and his enthusiasm for its delivery to a safe conclusion. Although it is not for me or my right hon. Friend to show any preference at this stage for those who are competing to supply the Northern line trains, we follow the matter with interest and will certainly ensure that time is not lost unnecessarily.

Motorways

Mrs. Angela Knight: To ask the Secretary of State for Transport what assessment he has made of the environmental benefits resulting from the tolling of motorways.

Mr. Spring: To ask the Secretary of State for Transport what assessment he has made of the environmental benefits of the tolling of motorways.

The Secretary of State for Transport (Mr. John MacGregor): Motorway tolling will provide another source of finance for improving the motorway network, helping to avoid the congestion and associated environmental problems that would otherwise come with economic growth and increasing traffic. It will also enable more efficient use to be made of the network, for example, by pricing to spread peak-period congestion.

Mrs. Knight: I thank my right hon. Friend for his reply, but motorway noise will still be high. Is he aware that the houses of my constituents in Long Eaton and Sawley are a bare 20 ft from the edge of the M1, with only a garden fence between them and the traffic? In such circumstances, does he agree that effective sound barriers are needed, whether or not the motorway is widened, so that my constituents can again hear themselves speak in their gardens?

Mr. MacGregor: The effective way of dealing with that problem is to take measures when the motorway is widened. My hon. Friend will know that a preview of the public consultation for widening between junctions 25 and 18 is taking place today and in the coming weeks. I believe that my hon. Friend has been able to discuss all those matters on site with representatives of the Highways Agency. I can tell her that the agency expects mitigation measures, which will come with the widening, to reduce

the noise significantly, and they will include contouring the adjoining land, putting up fencing and the other measures to which she refers.

Mr. Spring: Does my right hon. Friend agree that the extra revenue raised from tolls can be used to improve motorways, thus diverting money to help keep traffic off minor roads? Does my right hon. Friend appreciate that, in rural Suffolk constituencies such as mine, where there is great concern about excessive traffic in our historic villages, the environmental advantages of that are fully recognised?

Mr. MacGregor: My hon. Friend is certainly right that that will be one benefit of motorway tolling; it will enable additional finance to be found for the widening of motorways. That will enable us to avoid some of the environmental disadvantages that will accompany increasing traffic if traffic increasingly goes off the motorways and on to historic towns and villages or other villages and towns nearby. So there is definitely an environmental benefit to be had from motorway tolling—in addition, of course, to the benefits of reducing congestion and its costs.

Mr. Bennett: But what estimate does the Minister have of the number of people who will not be willing to pay the tolls and will divert on to existing roads instead? Is not he already aware that some people seem reluctant to pay tolls on some of the river crossings and are already putting extra burdens on existing roads? Is not this a crazy policy?

Mr. MacGregor: If the hon. Gentleman looks at the consultation document on motorway tolling, which was published last year, he will see that that was addressed fully in a chapter of its own. The point is, first, that it is important to keep the motorway tolls at a reasonable level to avoid the danger of local diversion but, secondly, that if we do not widen the motorways, diversion to local roads is likely to be much greater because of congestion on those motorways.

Ms Eagle: But does not the Secretary of State realise that, if he imposes a tax on using motorways, people will seek to avoid it by diverting on to other roads? All that he is doing is creating even more problems for drivers and public transport policy. Surely, what he should do is to instigate proper public transport policy and persuade people to move away from using the car.

Mr. MacGregor: We are currently spending very substantial sums on public transport. Investment is at a record level. The hon. Lady must recognise that it would not be possible to duplicate with a public transport system all the many thousands of journeys with different sources and different destination points that are undertaken each day on the motorway. That would be physically impossible. It is therefore important to improve the motorways to avoid the very dangers that she foresees of diversion on to local roads which will arise if the motorways are not effective.

Passengers Charter

Mr. Waterson: To ask the Secretary of State for Transport whether he will make a statement on Network SouthEast rail services in relation to passengers charter standards.

Dr. Spink: To ask the Secretary of State for Transport if he will make a statement on Network SouthEast rail services in relation to passengers charter standards.

Mr. MacGregor: I am pleased to say that, on average over the year ending 24 June 1994, 14 of the 15 south-east commuter routes met or exceeded their passengers charter standards for punctuality and 12 met or exceeded their standards for reliability.

Mr. Waterson: But does my right hon. Friend agree that it makes complete nonsense of attempts by management and staff to improve rail services and to benefit from increased investment in the railway system when the whole system can be brought to a halt by a small group of workers harking back to the bad old days of excessive trade union power?

Mr. MacGregor: I agree with my hon. Friend that the strike does not help with improvements for passengers—or, indeed, for all customers, including freight customers —on the railways, for the very reason that my hon. Friend gives. If there are damaging and unnecessary strikes, they frighten traffic off the railway which may not come back. Such strikes can only be at the expense of investment in the railways and thus damage the interests of all those who work on the railways. So I agree with my hon. Friend. The strike is damaging and unnecessary.
I hope that strike action will cease, because it is perfectly possible to reach a modern employment salary deal for the signalmen, as it has been possible to do for so many others. I hope that the signalmen will get on with negotiating that.

Dr. Spink: Notwithstanding the welcome recent improvements, as reflected by the passengers charter, and also the improvements that will flow from the £100 million resignalling project and the 25 317 sliding-door trains that will be introduced at the end of next year, does my right hon. Friend agree that we cannot improve services while the hard men of the left are on strike?

Mr. MacGregor: I think that my hon. Friend is referring to his own line, the London, Tilbury and Southend line. He is right to draw attention to the improvements on that line. Those improvements have come through management and employees working together in advance of the substantial capital investment to which he referred. I repeat that I believe that the strike is damaging to the railway industry and all who work in it. It is unnecessary, because it is perfectly possible to have a good, modern employment package for the signalmen. I hope that the strike will now end.

Mr. Campbell-Savours: Will the Secretary of State give us an assurance from the Dispatch Box that, if there were an accident on the railways in the Network SouthEast area arising out of the use of untrained signalmen, Railtrack would be fully insured against any claims for damages?

Mr. MacGregor: Railtrack is taking all the steps necessary to ensure safety, as everyone would. Railtrack has informed the Health and Safety Executive of all the competence checks that it is applying to ensure that its legal duty on safety is met. It is for the inspectorate to ensure that that happens.

Mr. Snape: Does the Secretary of State agree that, if Railtrack is allowed to make an offer similar to the 5.7 per cent. offer that was withdrawn following his intervention, that would be likely to make a majority of signalmen reflect on whether they should go back to work? If his hon. Friends are going to trot out those hoary old stories about the hard left, is not it about time that he joined the hard left and we wheeled out Mr. Solomon Binding and allowed him to negotiate freely between the two sides without the interference of the Secretary of State or some of his silly hon. Friends on the Back Benches?

Mr. MacGregor: I have made it clear that the Government's approach to public sector pay should be followed in this case. The approach is that any productivity improvements for the future—of which there are many because there are still an awful lot of very old-fashioned practices on the railways—should be self-financing and the total cost should be met out of Railtrack's wage bill. That is the position that I have made clear. I believe that the offer that has been made is reasonable.
The real question, which has been often asked and never answered, is whether the Labour leadership will condemn this unnecessary and damaging strike. The hon. Member for Cunninghame, North (Mr. Wilson) has said that he supports the strikers. Will the hon. Member for Holborn and St. Pancras (Mr. Dobson), on behalf of the hon. Member for Sedgefield (Mr. Blair), say whether the Labour leadership condemns the unnecessary strike, which is damaging to the railways and all who work in them. Yes or no?

Mr. Dunn: Is my right hon. Friend aware that all Conservative Members want to see improving standards of service on Network SouthEast? Is not it clear that the image of the region will suffer so long as the RMT strike continues and continues to be dominated by a handful of Marxist-Leninists, many of whom have friends on the Opposition Benches?

Mr. MacGregor: I agree with my hon. Friend on two points. First, escalating the strike to two days a week looks like a throwback to the sort of actions that we saw in the 1970s, which so damaged the industries affected. Secondly, the strike will be damaging for railwaymen because many passengers are finding alternatives means of transport and some of them will stick to them. Even worse, all that is happening at a time when we are trying to get more freight off road and on to rail, particularly with the opening of the freight terminals to the channel tunnel, a major opportunity for the railways. Having unreliable trains that do not run because of a strike is not the best way of attracting new freight on to the railways. That is why I say that the strike is damaging, unnecessary and not in the interests of railwaymen.

Mr. Harvey: Passengers in the south-east and elsewhere have experienced disturbances for some weeks because of the dispute over productivity and pay. Does the Secretary of State agree that, given that the efforts of the Advisory, Conciliation and Arbitration Service to bring about a reconciliation do not appear to have succeeded, it is time for the matter to go to independent arbitration? Will he urge that on Railtrack?

Mr. MacGregor: This is a matter for ACAS. I hope that the two sides will get together again with ACAS because I do not believe that all the issues have been


thoroughly discussed and negotiated. A modern employment package is on offer which, not least in terms of improved, much-enhanced basic pay and much-enhanced pensions, is in the interests of signalmen as well as of the railway industry.

Mr. Wilson: Will the Secretary of State give a clear and unequivocal answer to the question: is there any person working in a signal box anywhere in Britain on days of industrial action who would not be there at other times in terms of achieving the certificate of competence? Have the conditions changed in any way to accommodate the industrial action? Does he agree that if the Government were to get out of the dispute, it could be solved very quickly? Will he answer another specific question: will he allow Railtrack to restore the 5.7 per cent. offer which took account of retrospective productivity gains which it knew were fair, which the unions knew were fair, and which only the Government prevented from being delivered?

Mr. MacGregor: I understand that Railtrack ensures that all staff operating signals are competent to do so under the provisions of the Health and Safety at Work, etc. Act 1974 and the Railway (Safety Critical Work) Regulations 1994. It is reasonable for the Government to have an approach towards public sector pay, given the substantial proportion of overall Government expenditure that is involved—more than 25 per cent. I note that the Labour party is talking about controlling public expenditure, but shies away from any steps that are taken to do so. It is reasonable for the Government to have an overall attitude to the matter, but it is for Railtrack and the RMT to negotiate. All hon. Members will have observed that, once again, those on the Opposition Front Benches are refusing to make clear their position on an unnecessary and damaging strike.

Historic Buildings

Mr. Alison: To ask the Secretary of State for Transport what estimate he has made of the beneficial effect on historic buildings of the removal of heavy traffic from towns and villages by diverting it on to new bypasses.

The Minister for Roads and Traffic (Mr. Robert Key): Right hon. and hon. Members throughout the House remind me ceaselessly of the benefits of bypasses, for both the buildings and the people of communities living with high levels of through traffic.

Mr. Alison: Representing, as he does, a cathedral city, will my hon. Friend harness his natural ecclesiastical sympathies to his considerable political weight to expedite the day when Selby abbey is embellished and protected by the Selby bypass?

Mr. Key: Yes, of course I will. Since the memorable delegation that my right hon. Friend brought to see me last year, progress has been made. The forces of nature, however, cannot be ignored and, in engineering terms, the scheme is particularly difficult. There have been problems with ground work, but I hope that compulsory purchase orders can be published in the autumn.

Mr. Flynn: Does not the Minister realise that growth in traffic has meant that bypasses are being deserted and that traffic is going back into the historic heart of cities, poisoning the people there with an unprecedented mixture

of carcinogens, benzenes, and PM10s? All are produced and pumped out into the atmosphere. They are then held in place by a lid of barometric pressure and a windless day, and are cooked by the sunshine. We are creating a lethal cocktail for our people to breathe in and we do not yet know the results of the inquiry into what happened in December 1991. As this enormously dangerous, uncontrolled experiment is occurring in our cities every fine day, how on earth can we contemplate doubling the growth of traffic?

Mr. Key: The answer to the second question is, easily; the answer to the first is, can the hon. Gentleman name one?

Mr. Wolfson: Does my hon. Friend agree that when new bypasses are built or motorways widened, one of the continuing problems is that of noise? Does he support my contention that, where possible, quieter road surfaces should be used? Porous asphalt, in particular, is a positive move forward and we want much more of it.

Mr. Key: Of course my hon. Friend is right. Noise can be an abomination and can ruin the quality of life of many people. But my hon. Friend should not rely only on porous asphalt. Technology is on our side and even better surfaces are now being developed. For example, whisper concrete is not only quieter but lasts many times as long as porous asphalt, which means that roads do not have to be dug up as often.

Trunk Roads Review

Sir David Knox: To ask the Secretary of State for Transport how many representations he has received concerning the publication "Trunk Roads in England 1994 Review".

Mr. Key: We receive many representations about road improvement schemes from individuals and organisations, the majority of which express concern that it has not been possible to proceed with particular schemes as fast as people would like.

Sir David Knox: Is my hon. Friend aware of the great concern in my constituency about the removal of the Leek-Rushton bypass from the national trunk road programme? What measures does he intend to take to deal with the problem of congestion in Leek, and does he think that the project should be reinstated in the programme?

Mr. Key: I remember very well the representations that my hon. Friend made on behalf of his constituents earlier this year—and I, too, was sorry that the Leek bypass was withdrawn on environmental and economic grounds. But the district council and the Highways Agency are meeting on 22 July to consider a package of local improvement measures for the town and I should not wish to pre-empt those discussions.

Traffic (London)

Mr. Harry Greenway: To ask the Secretary of State for Transport how many (a) private cars, (b) buses and (c) other vehicles are currently using London's roads; what this figure was (i) 10 and (ii) 20 years ago; and if he will make a statement.

Mr. Norris: I am afraid that the figures that my hon. Friend wants are not readily available in the form that he requested, but, for instance, between 1972 and 1990, the number of motor vehicles crossing the cordon line around inner London in a 24-hour count rose by 16 per cent.

Mr. Greenway: Does my hon. Friend agree that more and more of my constituents are being forced on to the roads—

Mr. Flynn: Riding horses?

Mr. Greenway: Well, certainly Shanks's pony, and no doubt some of them would like to use horses to overcome the problems of getting to work that are posed by the strike. Is not it outrageous that they are being exploited— and constituents throughout the country are being exploited — by a group of people whose best interests would be served by their getting back to work and staying there?

Mr. Norris: I am afraid that my hon. Friend is right. His constituents will investigate other means of getting to work and some, no doubt, will continue to use them when this sorry dispute is over. It seems to me to be an absolutely classic case of how to commit industrial suicide.

Ms Glenda Jackson: Is the Minister aware that my local authority, Camden, today issued a report showing that European Union guidelines on nitrogen dioxide and ground-level ozone have been breached consistently in the past month? What additional funds are the Government attempting to find, first, to create more bicycle lanes in my local authority and, secondly, to provide a properly integrated public transport system for London and Londoners?

Mr. Norris: I am never greatly surprised by anything that Camden council does, but the Government acknowledge that the problems of air pollution are extremely serious. The hon. Lady should know of the extensive pattern of works and programmes that is in place to improve air quality, of which improved facilities for cyclists is an important element. She will be aware of the 1,000 mile cycleway that the Department of Transport has sponsored, which I am pleased to see boroughs taking forward. I hope that she will note that a number of Labour boroughs have seemed to be extraordinarily unwilling to introduce their 1,000 mile cycleway plans, but perhaps she will urge them to do so more quickly.

Mr. Peter Bottomley: Does my hon. Friend accept that during the years of economic growth in the 1980s the number of people commuting by car in central London fell and the number of people using public transport rose, and is not it a tragedy that in the past month and a half every single person who relies on the railway, as many of my constituents do, has been shown that the railways are unreliable and that most of the investment will be delayed by this ridiculous strike? Is not it about time that RMT-sponsored Members of Parliament started siding with the traveller and not with antiquated union agreements?

Mr. Norris: My hon. Friend must be entirely right. It cannot be anything other than sheer industrial lunacy to kill the basis of the industry that one hopes will provide one's future employment. That is exactly what the RMT signalmen are doing in the dispute. The sooner they understand that, the better they, and Londoners, will be.

Mr. Raynsford: Why was the Minister so coy about revealing the figures? Does he accept that, over the past 20 years, there has been a dramatic increase in the volume of traffic involving private cars and lorries coming into London and, simultaneously, a drastic and very serious decline in the use of London's buses? Does he recognise that that is the path to disaster in London? Until the Government understand the lesson and change their policy, all that Londoners will have on offer is a nightmare of increasing congestion, pollution and traffic chaos.

Mr. Norris: I am delighted to say that, as London has had a Conservative Government for most of the past 20 years, economic activity has increased substantially and the amount of traffic has increased with it. However, the hon. Gentleman should get his facts right. The number of passenger journeys on London's buses increased by 8 per cent. between 1982 and 1992.

Mr. Jessel: Given the enormous importance of both bus and car traffic in London, will my hon. Friend send for papers from Kingston council about its intention to close Kingston bridge for repairs for an entire year? That will cause enormous disruption as there will then be a six-mile stretch of the Thames within Greater London without any road bridge.

Mr. Norris: I understand my hon. Friend's quite proper concern about Kingston bridge, which is in his constituency. I hope that he will appreciate that it is not a bridge for which I have direct responsibility. However, if my hon. Friend would care to discuss the matter with me, I will certainly do what I can to assist.

Pollution

Mr. Denham: To ask the Secretary of State for Transport what action is he taking to reduce the level of pollution caused by motor traffic.

Mr. MacGregor: As a result of improvements to vehicle standards, the MOT emission check and the planned real increase in fuel duty, pollution from motor traffic is falling and will continue to do so until well into the next decade. We continue to be concerned about this problem, are undertaking further research and would be ready to take further action when appropriate.

Mr. Denham: When 1 million asthma sufferers are at risk from air pollution, will not the Minister's words strike everyone as a sign of complete complacency? Are not even his smallest priorities wrong? Is not he embarrassed by the contrast between the ludicrous amount of energy that has been spent on the ridiculous cones hotline and the difficulty that people have in reporting polluting vehicles to the authorities? Is he aware that my constituents are told that they must ring Bristol at their own expense, that no one has ever been prosecuted as a result of a telephone call to the unit in Bristol and that none of the police forces have the portable devices necessary to test and then prosecute grossly polluting vehicles?

Mr. MacGregor: On the last point, we are specifically carrying out research to discover what can be done to achieve a fully effective system, as there is not yet one. However, the hon. Gentleman is entirely wrong about complacency. A substantial number of actions have been taken in the past three years, some of which I have listed,


and the introduction of catalytic converters will reduced harmful emissions by more than 75 per cent. It is important that such actions are taken at European Union level, not least because continental sources account for roughly half ground-level ozone concentrations in the southern part of Britain. That is why we are pursuing the matter at that level, why further measures are being taken in the Council of Ministers and why I am always ready, because I very much share the concern about the problem, to consider other action which could be taken.

Sir Jim Spicer: Does my right hon. Friend accept that while all those measures are good, if traffic is stationary in one place for a long time, there is a build-up of pollution? May I draw my right hon. Friend's attention to the fact that the village of Tolpuddle yesterday held the annual commemoration of the Tolpuddle martyrs? The traffic jams consequent upon that were horrendous. However, for 364 other days of the year, my constituents suffer from the same problem. Will my right hon. Friend have a word with the Minister for Roads and Traffic to ensure that the Tolpuddle bypass is moved up the list as a matter of urgency?

Mr. MacGregor: As my hon. Friend knows, we have drawn up a list of priorities for bypasses, and he is right to draw attention to their importance. Traffic that is either not moving or is moving very slowly pollutes the atmosphere much more than normal moving traffic. That is why it is so extraordinary that the Liberal Democrats have committed themselves to removing 41 major motorway improvements, which is bound to have considerable environmental disadvantages, not least in respect of the atmosphere. The many traffic calming measures and other measures that we are introducing, in particular the red routes in London, are designed to make a contribution to improving the situation. We have to take a series of steps, and those are just some of them.

Ms Walley: Rather than going it alone, why will the Secretary of State not say that it is important that he should work with the Departments of Health and of the Environment? It is impossible to do anything about the problem of pollution if he is not prepared, with his colleagues, to set standards for, and to monitor, air quality. Is not it the right hon. Gentleman's roads programme which is at fault? Is not the real problem that it is generating more traffic?

Mr. MacGregor: I assure the hon. Lady that we co-operate in working on those issues and in working on planning policy guidance note 13 to find solutions. I beg the hon. Lady to understand that the roads programme has an important contribution to make to our economic competitiveness, which is the other important part of it, as well as to enabling the many millions of our citizens who want to use their cars more to do so. The programme is important because unsatisfactory roads which cause great congestion and act almost as car parks with cars ticking over pollute the atmosphere much more than roads on which traffic moves freely.

Roads Budget

Mr. Merchant: To ask the Secretary of State for Transport what fraction of his Department's annual budget is spent on roads; and what fraction of journeys in Britain every year is made by road.

Mr. MacGregor: Over the past three years, just under half of my Department's total budget was spent on roads. Given that nearly 90 per cent. of all journeys nationally are by road, that demonstrates how my Department's expenditure is skewed relatively towards public transport.

Mr. Merchant: Does my right hon. Friend agree that, whatever some people might pretend, his figures powerfully demonstrate the extent to which his budget is deliberately accentuated to encourage public transport rather than private transport? Should not my right hon. Friend be strongly congratulated on achieving that success?

Mr. MacGregor: I am grateful to my hon. Friend. That success shows in the many large public transport projects that we are currently undertaking, and it shows also in the figures. Planned investment in public transport remains at historically high levels and it will involve expenditure of not far short of £6 billion over the next three years.

Mr. Tony Banks: When will the Secretary of State accept that the more money he spends on roads, the more people will use private vehicles and the more congestion and pollution there will be? At the moment, Londoners are choking to death. Hospitals are inundated with people with respiratory diseases and the Government are doing nothing about it—they are stunningly complacent. When will the Secretary of State take action? For example, on days when pollution reaches danger levels, he should ban the use of private vehicles in central London and he should also start doing something about engines that pollute London. Is he aware that, while he is stunningly complacent, people are choking to death on the streets of London?

Mr. MacGregor: I have already explained that we are taking a considerable number of measures. As the hon. Gentleman knows, one of the potential measures that we are looking at is congestion charging in London, on which we are doing probably the biggest piece of international research that has ever been done. I notice that the hon. Gentleman is committed to banning vehicles on the roads in central London. I do not believe that that is what the vast majority of people want.

Mr. Sumberg: May I tell my right hon. Friend of the widespread concern in my constituency at the way in which his budget is being spent on the M62 relief road? He has now acquired a number of houses in my constituency. Many of them are empty and many are in disrepair. There is widespread concern among my constituents about who will take tenancy of those properties. Will my right hon. Friend urgently look at the management that is undertaken by the Highways Agency so that we can put a decent, sensible system into operation?

Mr. MacGregor: My hon. Friend the Minister for Roads and Traffic is currently doing just that.

Mr. Dobson: The Secretary of State has acknowledged that this year he is spending more than £2 billion of taxpayers' money on building new roads. Could he change his priorities and allow Railtrack to spend £5 million on settling the signalling staff's dispute? Is not that what it would have done with its offer of 5.7 per cent. if the Secretary of State had not intervened and stopped the payment?
If the right hon. Gentleman says that he cannot take the money from the roads programme, would he consider


diverting it from his privatisation programme? He is pouring £5 million into the pockets of one firm of City lawyers which is to advise him on privatisation. Does not he think that most passengers would consider the money better spent on the signalling staff?

Mr. MacGregor: I assure the hon. Gentleman that the money that we are spending on our rail reforms will ensure a much better railway for the future. The intention is to attract more passengers and freight on to rail. That is why I am concerned about the current strike: at the very moment when we can attract more freight on to rail, it is discouraging people and companies. I note that the hon. Gentleman still refuses to condemn this thoroughly unnecessary strike.

Oral Answers to Questions — ATTORNEY-GENERAL

Serious Fraud Office

Mr. Sykes: To ask the Attorney-General what plans he has to improve the effectiveness of the Serious Fraud Office.

The Attorney-General (Sir Nicholas Lyell): Since 1988, the Serious Fraud Office has made a real contribution to the investigation and prosecution of serious fraud. A number of detailed recommendations of the recent review have already been implemented; others are in hand, and others are being studied.

Mr. Sykes: Does my right hon. and learned Friend agree that the fraud police are doing an excellent job, and that eight times out of 10 they get their man? [Interruption.] Will Opposition Members please stop gibbering? One might as well go to London zoo. Would not joint vetting further improve those tremendous statistics?

The Attorney-General: My hon. Friend is entirely right. The Serious Fraud Office has a commendable record in achieving convictions in the cases that it brings to trial; in more than 80 per cent. of cases, the principal architect of the fraud has been brought to justice.
My hon. Friend is also right to mention joint vetting between the Serious Fraud Office and the fraud investigation group of the Crown Prosecution Service. They are getting together to decide which case should go to which body, starting next week. I commend that move.

Mr. John Morris: Is the effectiveness of prosecutions likely to be enhanced or diminished by the departure from office of the Attorney-General's Parliamentary Private Secretary? Will he give a categorical assurance that he was not approached by his ex-PPS as an intermediary in the case of Mr. Charrington and that the Paymaster General —who is responsible for Customs—was not approached either? Will the Attorney-General clear the air in regard to why his PPS has departed and, I understand, is not to be replaced?

The Attorney-General: I am surprised that the shadow Attorney-General should concentrate on such a matter.

Mr. John Marshall: Does my right hon. and learned Friend accept that many are not as happy as some commentators about the work of the Serious Fraud Office?

Does he accept that many believe that serious fraud should be tried not by juries but by technical assessors, as recommended by the Roskill report?

The Attorney-General: My hon. Friend has expressed a view which is supported by a number of people. At present, I do not share that view; over the past 13 years, during which I have considered the matter carefully., the principal difficulties have tended to arise from the need to arrange an effectively mounted prosecution and to ensure that judges with the difficult and onerous task of trying the cases are properly trained and have the right background.

Mr. John Morris: Is the Attorney-General unable to give the categorical assurance for which I asked, or is he just plain insolent?

The Attorney-General: I am perfectly able to do so, but it does not really arise from the question.

Sir Ivan Lawrence: Is not it a fact that the Customs and Excise prosecuting authority is fiercely independent and is not swayed by anything that any Member of Parliament may ask, or not ask, of its favour? It is sometimes influenced by the advice that it gets from the Attorney-General, but it is always fiercely independent in making its decisions.

The Attorney-General: My hon. and learned Friend is entirely right. The right hon. and learned Member for Aberavon (Mr. Morris) has already received answers to his questions. If he would only refer back to them, he would not bother to ask them again.

War Crimes

Mr. Winnick: To ask the Attorney-General if he will make a statement on the progress of beginning prosecution proceedings in the United Kingdom against those held responsible for Nazi war crimes.

The Attorney-General: The Metropolitan police war crimes unit is continuing to investigate about 28 cases and has submitted interim reports to the Crown Prosecution Service in 10 of those. Police inquiries are not yet complete and no decisions can be taken about prosecutions until they are.

Mr. Winnick: Is not there all the difference between what may happen in the heat of battle, as in the Falklands war in hand-to-hand fighting—although I do not condone anything improper that might have occurred, even then —and the systematic, cold-blooded murder of men, women and children, as was the case with the Nazi war crimes? What sort of message would go out to those committing such crimes, be it in Rwanda or Bosnia, if those who had committed the most terrible crimes against humanity were not brought to justice simply because of the delay of time? They should not have come to Britain in the first place, but if they have come to Britain and there is evidence against them, should not they be tried, regardless of time?

The Attorney-General: The House made its views on this matter clear when the War Crimes Bill came before it. That Bill has passed into law and the police are properly carrying out the investigations and will, in due course, make their report to the Director of Public Prosecutions. The matter will then be considered in accordance with the law.

Mr. Jacques Arnold: Is my right hon. and learned Friend aware that if there are allegations against anyone resident in this country who may have participated in heinous crimes in concentration camps on the continent during the last war, the public believe that those people should be investigated and prosecuted, if necessary?

The Attorney-General: The point that my hon. Friend is making tallies well with the investigations that are being carried out.

May Inquiry

Mr. Jamieson: To ask the Attorney-General what was the cost of Sir John May's inquiry into the Guildford and Woolwich case; and if he will make a statement.

The Solicitor-General (Sir Derek Spencer): The total reported costs at 7 July 1994 were £2,150,000.

Mr. Jamieson: Is the Solicitor-General satisfied that more than £2 million of taxpayers' money was used on Sir John May's inquiry, which had no power to subpoena witnesses or to call documents and yet absolved from blame all those involved with miscarriage of justice, except those people cleared by the Court of Appeal? Does not he know a cheaper source of whitewash?

The Solicitor-General: Opposition Members were quick to adopt Sir John May's findings in the Maguire inquiry when it suited their book. Now that it does not, they sing a different tune.

War Crimes

Mr. Cyril D. Townsend: To ask the Attorney-General when he expects to bring prosecutions under the War Crimes Act 1991.

The Attorney-General: I refer my hon. Friend to my reply a few moments ago to the hon. Member for Walsall, North (Mr. Winnick).

Mr. Townsend: Can my right hon. and learned Friend confirm that more than £8 million has been set aside for war crime prosecutions this year, but none for next year? How is evidence to be obtained from foreign countries concerning alleged events that took place more than 50 years ago? Will he take a close look at what happened in Australia, Canada and Israel, where they went down a similar path and ran into serious trouble?

The Attorney-General: My hon. Friend is right—£8 million had been provisionally set aside in the event that prosecutions took place this year. I well understand my hon. Friend's views on the matter. It is difficult to investigate events that took place 50 years ago. That is why it has to be done carefully and scrupulously, as I assure my hon. Friend is being done.

Mr. Tony Banks: Will the Minister accept that time can in no way discharge the heinousness of the crimes that were perpetrated by some of the Nazis against a large of number of people, including Jews? Under the circumstances, £8 million is money well worth spending.

The Attorney-General: I entirely accept the first part of what the hon. Gentleman says. Of course, the investigation has to be able clearly to establish what did or

did not happen 50 years ago so that the question whether there is a realistic prospect of conviction of any person can be properly evaluated.

Matrix Churchill

Mr. Mike O'Brien: To ask the Attorney-General what representations he has received in the last month on the prosecution decisions which were taken in relation to Matrix Churchill.

The Attorney General: I have received no such representations.

Mr. O'Brien: Is the Attorney-General aware that, as a result of his questionable involvement in the decisions relating to the prosecutions of Matrix Churchill, 600 people working for that company lost their jobs? Before he perhaps loses his job in the next few days, would not it be right for him to say that his involvement in that incident was regrettable and to apologise to those workers?

The Attorney-General: No. If the hon. Gentleman, who is a lawyer himself, does the subject justice and takes the trouble to read and think carefully about my part and the part of others, he will realise that it was done carefully and with complete integrity, in accordance with the law as it was understood at the time.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

Non-governmental Organisations

Mr. Rowe: To ask the Secretary of State for Foreign and Commonwealth affairs what plans he has to provide further assistance to British non-governmental organisations working to assist development.

The Parliamentary Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. Mark Lennox-Boyd): The 14 per cent. increase for the joint funding scheme and 8 per cent. for the volunteer sending programme for 1994–95 are very significant increases at present.

Mr. Rowe: I thank my hon. Friend for that reply, but can he give the House an assurance that the tragedy, and the urgent requirements, of the refugees flooding into Zaire from Rwanda are being carefully considered by his Department and that action will be taken to make it as easy as possible for NGOs to get every possible assistance as quickly as possible?

Mr. Lennox-Boyd: I know that non-governmental organisations will be assisting. At present, there are three aircraft. Two aircraft are on their way—one to Entebbe and the other to Nairobi. The first is the largest and will be unloaded in Entebbe; the second will arrive in Nairobi and wait for clearance to travel to Goma. A third aircraft is leaving tomorrow. Those aircraft are taking emergency humanitarian relief items which have been sent as a result of the assessment that was made, before the weekend's television pictures, by the ODA mission which, only last week, visited the area, including the particular spot where so many of the refugees are.

Mr. Simon Hughes: The Minister will be aware that the non-governmental organisations are clear in their message: not only in Zaire but in Uganda and Tanzania,


there is a need for significant extra help to deal with what is not simply the immediate crisis of refugees fleeing from Rwanda but what is likely to be the long and medium-term duty to look after them—certainly in the indefinite future. Given that the Government have made special additional allocations in the past when there has been a particular crisis in another part of the world, can the Minister undertake to the House that that is under active consideration and that, if necessary, such money will be forthcoming from the British Government?

Mr. Lennox-Boyd: We certainly remain ready to do more. As the hon. Gentleman is aware, since the crisis began, £11 million has been committed bilaterally for refugees and displaced people in the area. The assistance being delivered by the three aircraft to which I just referred, which is worth some £2 million, is additional to that.

Lady Olga Maitland: Does my hon. Friend agree that the extra resources given to non-governmental organisations is money well spent, especially bearing in mind that the non-governmental organisations have specialised knowledge, such as I saw in their family planning programmes in Malawi?

Mr. Lennox-Boyd: My hon. Friend is right. Non-governmental organisations generally react swiftly, are flexible and can get into remote areas more quickly than anyone else. It is for that reason that over the past three years we have doubled our overall funding to non-governmental organisations from £65 million to £150 million a year.

Mr. Tom Clarke: Will the Minister focus on the fact that there are now perhaps 1 million or more refugees from Rwanda in Goma in eastern Zaire? Is he aware that representatives of British aid agencies today described the situation there as "wall-to-wall bodies", and that the emergency facing the region is on a scale unlike anything ever seen, even in Africa? What has the Minister done to implement UN decisions on humanitarian relief for Rwanda and on other measures to assist aid agencies in the distribution of vital emergency relief? Does the Minister recognise that hundreds of thousands of people are in real danger in Goma and elsewhere, and that humanitarian intervention on a massive scale is now absolutely necessary?

Mr. Lennox-Boyd: Yes, we have responded and continue to do so. As I said in my earlier answers, ODA officials were there only last week. They assessed what we could do immediately, and we are doing it. Goma airport is still closed, but we hope that it will be open tomorrow so that the second aircraft which I mentioned can land there, and the third aircraft can land on Wednesday.

World Population Conference

Dr. Twinn: To ask the Secretary of State for Foreign and Commonwealth Affairs what is the status of planning for the world population conference to be held in Cairo in September.

Mr. Ottaway: To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on preparations for the United Nations international conference on population and development.

Mr. Lennox-Boyd: Planning for the international conference on population and development is well advanced. My right hon. and noble Friend will lead the British delegation.

Dr. Twinn: Will my hon. Friend confirm that additional resources will be made available by the Government to help implement what we hope will be the important outcome of this conference?

Mr. Lennox-Boyd: Yes, we very much hope that in the next two years—we have a planning figure in mind—we will spend some £100 million on family planning. That will be a 60 per cent. increase over current spending, which is already high and has increased every year since 1991. It will be vital for more to be spent in that sector following the conference.

Mr. Ottaway: I add my congratulations to my hon. Friend on the huge increase in funding which was announced last week by Baroness Chalker in what I believe to have been a significant speech. Will my hon. Friend reject any criticism of the increase, and can he tell us what are the prospects of some of our European partners matching the increase in funding before the Cairo summit?

Mr. Lennox-Boyd: Every second, almost three babies are born into the world and I very much agree with the impact of my hon. Friend's argument. We will certainly press all our European Union colleagues, and those responsible for the Commission's aid programme generally, to increase spending in that sector. We believe that the conference comes at a most critical junction, and it may well determine, through action and policy, whether the population of the world doubles or trebles in the next century. If we do the right things, it will only double.

Mr. Rooker: Will the Minister accept congratulations on the positive response that the Government have shown with regard to this important issue? In respect of the conference in September, will he attempt to get his officials briefed so that they are not misguided by the propaganda emanating from certain quarters to the effect that it is now the feminist position in the third world that women want to continue having more and more babies? That must be absolute nonsense and part of some religious propaganda organisation. It is in the interests of the whole population of the planet that population control is widespread.

Mr. Lennox-Boyd: It is most certainly in the interests of us all, and I agree with the hon. Gentleman. It is particularly in the interests of many women and their partners in the third world. Over half of the couples in the world practise family planning now, but we believe that at least 100 million families who would like to plan their families do not have access to family planning advice and services.

Mrs. Clwyd: Given that the population of East Timor has already been eradicated by one third due to the action of the Indonesian Government, may I ask the Minister immediately to investigate the atrocities in East Timor last week, when a further four people were killed and 74 imprisoned—

Madam Speaker: Order. The question concerns world population and the conference, and is not about atrocities. As interesting as her question may be, I fear that the hon. Lady is way off the beam on both points.

Uganda

Mr. Lidington: To ask the Secretary of State for Foreign and Commonwealth Affairs what recent discussions he has held with the President of Uganda concerning assistance to that country.

Mr. Lennox-Boyd: Both my right hon. Friends the Secretary of State and the Minister for Overseas Development had discussions with President Museveni during his recent visit.

Mr. Lidington: Does my hon. Friend agree that the good record of economic growth in Uganda since President Museveni took power illustrates the advantages of good government in generating benefits for the entire population of such countries and the sense of tying our own overseas aid policy to that principle?

Mr. Lennox-Boyd: My hon. Friend is quite right: Uganda has been a good story in recent years. British bilateral aid stands at about £34 million a year and has remained at that level in recent years. There is a great deal of approval of Uganda's economic policies, which have led to economic growth of about 5 per cent. a year since 1987. Tomorrow, at the World bank's consultative meeting in Paris, we shall announce a new pledge of some £20 million of balance of payments support for the current year.

Self-help

Mr. Jacques Arnold: To ask the Secretary of State for Foreign and Commonwealth Affairs to what extent aid programmes are focused on self-help.

Mr. Lennox-Boyd: The underlying objective of the whole aid programme is to build on and to promote self-help.

Mr. Arnold: Is not one of the greatest problems facing our overseas development programme the fact that it runs the danger of developing a complete reliance on what I would call the begging bowl mentality? Is not it important for our own overseas aid programme to concentrate on projects that allow self-help and thereby allow people to earn money and self-respect?

Mr. Lennox-Boyd: Self-help is central to the whole aid programme. I must tell my hon. Friend that most poor people in developing countries are extremely self-reliant. Our aid programme tries to help village and neighbourhood committees to look after water supplies, to maintain drains, to run kindergartens and to do other similar things. My hon. Friend might like to consider that when we spend between 80 and 85 per cent. of our bilateral aid in low-income countries, that is, of course, helping the poor to help themselves.

Social Housing

The Minister for Housing, Inner Cities and Construction (Sir George Young): With permission, Madam Speaker, I should like to make a statement about the Government's proposals for reform of the homeless legislation in England and Wales.
On 20 January, we issued a consultation paper with proposals to reform the homeless legislation so that, in future, there would be a single route for everyone seeking a secure or assured tenancy in local authority or housing association accommodation. My right hon Friend the Secretary of State for Wales issued a similar consultation paper at the same time.
Our main objectives in bringing forward the proposals were to enable local authorities to operate fairer allocation policies, while maintaining an effective safety net for families and vulnerable people who become homeless through no fault of their own. Nothing in the responses to the consultation paper challenges the logic of those objectives.
The present notion that households accepted by local authorities as homeless must be given "permanent accommodation" was not envisaged when the present statutory duty was created in 1977. It has grown up through case law, requiring long-term, settled accommodation. There is no reason why a household in suitable accommodation should be given a secure or assured tenancy for life merely because at some stage it has been accepted as statutorily homeless. That approach is not fair to people on the housing waiting list.
Our consultation paper attracted some 10,000 responses. I am arranging for a list of respondents to be placed in the Library of the House and copies of the responses themselves will be available for public inspection in my Department's library. A summary of what we intend to do in the light of the consultation, and a copy of my statement, have been placed in the Library and the Vote Office.
Many of the responses did not address the actual proposals, but responded to misleading claims by lobby organisations. Others wrote in about hypothetical effects of our policy. As I made clear to the House on 26 January, it is not and never has been our intention that families and other vulnerable people should be left to live on the streets or in unsatisfactory accommodation—as some of the more alarmist propaganda from our opponents has suggested.
The consultation paper set out 10 main proposals, many of which were welcomed by those who commented on them. A number of local authorities said that their present practice in relation to homelessness was not far from what the Government were proposing. Indeed, while there was much pleading for the status quo from vested interests, they offered no real answer to the main flaw in the current legislation—that those who apply for assistance as homeless gain priority in the queue for local authority tenancies at the expense of others who have comparable underlying housing needs.
We have taken careful account of those responses to the consultation paper that made substantive comments on our proposals. Part of our intention had been to give greater discretion to local authorities in the accommodation of homeless households, but many respondents asserted that that would place too great a responsibility on individual

authorities. Accordingly, we concluded that we should modify the proposals in the consultation paper to reinforce the safety net for vulnerable homeless people.
We therefore decided that a local housing authority's new duty towards a household in need of assistance should start, as it does now, when an authority has reason to believe that someone may be homeless and in priority need, prior to assessment of the household's circumstances.
The consultation paper invited views about how long the duty to secure accommodation should last. We have concluded that local authorities' new duty should be to secure accommodation for a minimum period of a year for applicants and their households in priority need who have no suitable accommodation available to occupy, provided that the situation has arisen unintentionally.
Some households may be able to remain in the accommodation indefinitely—for instance, if they obtain an assured shorthold tenancy that is renewed. Others may find themselves accommodation on their own initiative; and it is right that people should be encouraged to take responsibility for their own housing where they can.
Also, in most parts of the country a 12-month period on the housing waiting list will be long enough for someone with real housing needs to obtain a local authority or housing association tenancy. However, if the household continues to need assistance, the duty will recur, subject to a review of the applicant's circumstances. Such a review would be needed within two years.
The consultation paper proposed that a local authority would not have a duty to provide assistance to a person who has any form of accommodation available. The Government recognise the good work of women's refuges and other short-stay, direct-access, hostel-type accommodation. We do not want that type of accommodation to silt up through lack of move-on accommodation. Accordingly, we have concluded that local authorities' duty to secure accommodation should extend to people in refuges, direct-access hostels and other short-stay places such as bed-and-breakfast hotels.
The consultation paper proposed that someone who was asked to leave by family or friends should no longer be automatically entitled to assistance. We have considered a number of ways of implementing that proposal, and have concluded that the best approach may be to modify current provisions on intentionality so that they can take proper account of why accommodation is being withdrawn. That should minimise the scope for abuse. We shall also tighten the code of guidance to urge authorities to investigate such applications more thoroughly than many have done in the past.
A number of respondents expressed concern that the consultation paper made little reference to care in the community or Children Act responsibilities. That was because our proposals are fully consistent with authorities' responsibilities under community care legislation and the Children Act. We remain committed to ensuring that suitable housing continues to be available for vulnerable people who cannot be expected to make their own arrangements.
I confirm the proposition in the consultation paper that people who are granted entry to the United Kingdom on the understanding that they will have no recourse to public funds should not be entitled to assistance under the new legislation. We also intend to implement the proposal that local authorities should be required to have their own


appeals mechanisms for handling disputes. As the consultation paper says, we do not propose to disturb the current principles for deciding which local authority is responsible for someone seeking accommodation.
The Government intend to proceed with their principal proposal that, for new applicants, local authorities should only allocate secure tenancies in their own stock and the nominations that they make to housing association assured tenancies through a waiting list. Local authorities will have discretion over the allocation policies that they use to determine people's position on the list within the bounds set out in legislation. I emphasise that the proposed new system would allocate tenancies to those people in housing need more fairly than the present arrangements.
However, it has never been our intention that the Government should be involved in the details of allocation policy. Regulations would prescribe only minimum provisions—for example, to outlaw discriminatory practices, such as requiring a five-year minimum residence qualification.
We shall be inviting the Housing Corporation to take account of the new duties on local authorities in the statutory guidance that it issues to housing associations, so that it can continue to work in an effective partnership with local authorities.
The proposal to encourage local authorities and housing associations to establish joint waiting lists was largely welcomed, although housing associations especially were keen that that should be voluntary, and the Government are happy to give reassurance on that matter.
Many of the Government's proposals will require primary legislation, and we intend to introduce that when parliamentary time permits; as is currently the case, the legislation will extend to both England and Wales. In the meantime, we are considering what administrative action might be taken to further our objectives.
We intend to proceed with our plans to improve the fairness of local authorities' allocation policies, while at the same time maintaining a safety net for families and vulnerable people who become homeless. I commend our reforms to the House.

Mr. John Battle: Does the Minister not understand that that is an unworthy, mean-spirited statement, whose intention is still to change primary statutory homeless legislation, "as soon as parliamentary time admits"? The statement represents an attack on the basic rights to housing provision that not even Mrs. Thatcher, as Prime Minister, was prepared to contemplate. Does the Minister not understand that the policy will further scapegoat the homeless, that it will not provide a single new home for anyone, and that it will waste millions of pounds of public money?
Will the Minister now confirm—contrary to his claims about the lack of flexibility of the current provisions—that, as his Department made clear in 1989, the homeless with children have no automatic right to housing at present?
Does not the Minister understand that, under the current legislation, a council's task is to assess people's needs and then, if satisfied that they genuinely need accommodation, to help them secure it, and that under the present regulations, that can be in council, housing association or private rented stock?
Does the Minister also recall that a thorough review of homelessness legislation was held between 1988 and late 1989, under Mrs. Thatcher as Prime Minister, and Nicholas Ridley and Chris Patten as Secretaries of State? Was not Chris Patten correct to conclude that the present Act remains important and strikes
a reasonable balance between the interests of the genuinely homeless and others in housing need"?
He said:
We do not intend therefore to change the law".—[Official Report, 15 November 1989; Vol. 160, c. 243]
Is the Minister aware that, throughout the months of the new review, he was unable to produce a shred of evidence to show what has changed since that Ridley and Patten review? Where is the detailed evidence to back up the logic of his objectives, which he claims remain unchallenged? Which council or voluntary organisation ever called for that review, apart from Westminster and Wandsworth—and we know about their strategic housing objectives? Which organisation fully supports the consultative document? How many of those 10,000 respondents were in favour of, and welcomed, all his consultative proposals?
Will the Minister confirm that even the Secretary of State for the Environment's local Tory council, Suffolk Coastal, says that his January proposals were totally unworkable? Will the Minister now say a little bit more to the House about the costs and consequences of the new policy? When can we expect to see the primary legislation which he claims many of his proposals need? When will it be brought before the House? When will he confirm to the House that housing the homeless in private rented accommodation is often twice as costly to public funds as council or housing association accommodation—sometimes four times as costly?
How can the right hon. Gentleman square the idea of a six-month private assured shorthold tenancy with the new minimum period of one year that he has announced this afternoon? Will landlords now be forced to give extensions after the six-month period? Was not the whole point of the Housing Act 1988 to introduce a six-month assured shorthold tenancy that people would not have the right to extend? What will happen to people at the end of the one-year period that he has announced?
Why is the right hon. Gentleman placing blind ideological dogma above practical common sense and value for money? Does he not understand that, if councils were simply able to lease empty homes, many more on the housing waiting lists throughout the country could be housed and at a lower cost to the Exchequer than at present?
How much more could be done if councils were allowed to spend their capital receipts—a policy that this Minister used to espouse from the Dispatch Box? Why does not he have the guts to admit that this whole tawdry exercise has nothing to do with housing need and everything to do with the "back to basics" fiasco of last October's Tory party conference?
After all these months, what are we left with but a ragbag of proposals with legislative details yet to come? Does not the right hon. Gentleman understand that even his fellow Ministers have been appalled by his approach? Does he not remember the words of his hon. Friend the Minister for Roads and Traffic, who said that he had not yet met a single mother who had deliberately become pregnant to gain housing or financial advantage?
When Chris Patten explicitly rejected the Minister's approach, was he not right to tell the House that the real and long-term remedies for the levels of homelessness
are to be found in an effective housing strategy, based on the contributions of the private and public sectors".—[Official Report, 15 November 1989; Vol. 160, c. 244.]
Does not the Minister realise that it is his abject failure to secure such a strategy that lies behind the worst housing crisis this country has seen for decades, with the numbers of homeless having doubled since 1979, 850 families thrown on to the streets each week through repossessions, half a million building workers on the dole and a complete collapse in the council house building programme?
The policies announced today will only add to human misery and make that crisis worse. Instead of manipulating waiting lists, would it not be more positive to get back to building homes to rent for people who so desperately need them?

Sir George Young: On what the hon. Gentleman calls the "blind ideological dogma" behind my announcement, I remind him of what the chairman of the Labour party said on that very subject:
We need to transform the housing service so we have more appropriate housing readily available and a housing waiting list structure that positively rewards those who have tried their best to take responsibility and have some order in their lives.
Referring to people in his constituency, he said:
People there are not fools. If you cannot get a house by waiting on the list, you present the maximum number of reasons why you should receive priority. That is not encouraging people to accept responsibility in their own lives and society.
That was the chairman of the Labour party, and I endorse those proposals.
On the fundamental logic behind our proposals, I also remind the hon. Gentleman what was said in a leader in The Guardian:
Who should have priority: a 'registered' homeless family in temporary but comfortable accommodation—or an `unregistered' homeless family stuck in two cramped rooms in the home of a relative? Under present procedures the first has priority even when the second has more urgent housing needs … the housing minister believes the criteria should be changed so that the individual needs of all families on the two separate routes to a rented home … are weighed against each other. In principle he is right.
As for those supporting the proposals, many London boroughs—the London Boroughs Association at the time—supported our proposals.
The costs were set out in the consultation document. We estimated that they would be broadly neutral, though of course it will depend on when legislation is introduced and how it is interpreted.
On primary legislation, the House will understand that I cannot anticipate what would be in the Queen's Speech.
More people are moving off waiting lists now than when the present Administration came in.
Homeless acceptances, contrary to what the hon. Gentleman said, have fallen year on year for each of the past eight quarters. There have been some 41 per cent. fewer people in bed-and-breakfast accommodation over the past year. So I entirely reject what the hon. Gentleman said about the Government's housing record and urge him to reconsider his rather hasty condemnation of the principles behind what the Government propose.

Several hon. Members: rose—

Madam Speaker: Order. I want us now to proceed with brisk questions and answers. A number of hon. Members are seeking to be called. If hon. Members continue to make

statements instead of asking questions, and if they do not receive direct answers, many hon. Members will be disappointed.

Mr. Charles Hendry: I congratulate my right hon. Friend on listening to many of the more reasonable responses that came forward to the consultation document. Does he agree that nobody will benefit more from the statement than those single parents who are currently staying in rooms in cramped conditions—

Hon. Members: Question.

Madam Speaker: Order. The hon. Gentleman is asking a question, if the House would listen.

Mr. Hendry: Does my right hon. Friend agree that nobody will benefit more than those single parents who are currently living in cramped conditions in their parents' home, but find that they cannot make progress up the waiting list, because people are always jumping to the top of the queue? Will not his statement today give them a fairer crack at getting a house of their own?

Sir George Young: My hon. Friend is entirely right. Going through the representations that were made on the consultation paper, I was struck by the lack of priority that many people gave to those who are on the waiting list, living in difficult conditions—often in worse conditions than those who had been accepted as homeless and placed in temporary accommodation. It certainly is the case that the people to whom my hon. Friend referred stand to gain from the changes that we now propose.

Mr. David Rendel: Does the Minister agree that the basic lack of affordable rented accommodation, which his proposals do nothing to address, means that putting people into short-term rented accommodation is simply introducing a new form of homelessness that we have not seen before—recycled homelessness?

Sir George Young: Let me remind the hon. Gentleman what his hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) said when the subject was raised during a debate organised by Roof magazine:
It is an unacceptable position that a first-time tenant, whether a conventional two-children married family, a single mum with three children, or single person with mental illness, goes necessarily and obviously into what may in many cases be brand new housing stock, when over the other side of the road are people who have been overcrowded for 30 years, paid their rent on time and cannot be moved.
I support what the hon. Member for Southwark and Bermondsey said. Our proposals will put that injustice right.

Sir Peter Emery: Will my right hon. Friend accept that one thing that his statement will do is ensure that my constituents in east Devon, who support his policy —it has nothing to do with London—will see that young couples who have been waiting to get on to a housing list, who will not get married or have children until they are housed, will now be able to have their housing need taken into account and not be permanently pushed down by people coming into my constituency, which is very popular because it is a seaside constituency, and all the local people are suffering?

Sir George Young: My right hon. Friend speaks for many people who wait patiently on the waiting lists and are


exasperated by the way in which the present position is abused in the way that he described. There will be much broad support for the principles behind the new legislation.

Mr. Peter Shore: Is the Minister not aware that his proposals, so far as they affect the housing stress areas in the inner cities, will be greeted almost with incredulity? In boroughs that already have thousands of families who are homeless, and thousands of families who are living in disgusting, overcrowded conditions, what those families want is not a shift in priorities between one category of need and another, but more rented housing at rents that they can afford. Will the Minister tell the House what he will do about those wretched families when their one year of temporary accommodation comes to an end?

Sir George Young: The right hon. Gentleman's local authority was one of those which supported the Government's proposals. [Interruption.] The right hon. Gentleman's local authority supported the proposals, and it was elected by local people. [Interruption.] There is no point in the hon. Member for Blackburn (Mr. Straw) shouting at me like that. A democratically elected local authority, speaking on behalf of people in Tower Hamlets, supported the proposals.
As for the increase in new accommodation, we made a commitment at the most recent general election to provide 153,000 new homes through housing associations. We are exceeding that by 25,000, producing 178,000 new homes over that period.

Dame Elaine Kellett-Bowman: Does my right hon. Friend accept that I warmly welcome the proposals, particularly those about women's refuges, which will mean that the women there will not have to occupy them permanently, but will be assisted in finding somewhere else to live? Does he further accept that it is extremely unkind to young mothers to put them in a home of their own with no support, and not knowing how to look after a baby or a house? It is far better to put them in other sorts of accommodation and not in council housing.

Sir George Young: I am impressed by the good work done by women's refuges. That is why we modified the proposals that were originally sent out. My hon. Friend is right. Some young mothers aged 17 or 18, who already have to cope with bringing up a child, would not respond readily to the responsibilities that go with a local authority tenancy. It is often in their interests to put them in a hostel with other people in a similar position, with access to mature support from other adults before they take on a tenancy of their own. There is a role for hostels in exactly the circumstances that my hon. Friend has outlined.

Mr. Gerald Kaufman: Is not the Minister's statement good news for the manufacturers of cardboard boxes? Is it not a fact that the Government are setting up a conflict between those on waiting lists and those who are involuntarily homeless? Is it not a fact that the Government are strengthening the opportunities for victimisation of the homeless by exploitative landlords, who are already becoming millionaires because of the Government's policies?
Is this not a policy of people who do not care about human beings, about need or about poverty? Is it not a fact

that the problem comes about because of the abolition of the local authority housing programme and the fact that the housing association programme is only a fraction of it? The policy is typical of the attitude of the Government, and the sooner they get out the better.

Sir George Young: That is absolute nonsense. The right hon. Gentleman should know that many local authorities, many of them Labour-controlled, have a much more enlightened approach to the role of the private rented sector in their area. They are developing constructive partnerships to make sure that good-quality private rented accommodation is available to those who are homeless. They are developing rent deposit schemes and rent guarantee schemes and they are fast-tracking housing benefit.
I do not share the right hon. Gentleman's view that everything that is publicly owned is good and everything that is privately owned is bad. There is much good-quality privately owned accommodation of which we should make better use, and much publicly owned accommodation that is a disgrace.

Mrs. Teresa Gorman: Does my right hon. Friend agree that he has earned the congratulations and thanks of the British taxpayers, who are fed up with forking out for foreigners who come here and obtain free accommodation, particularly in our cities? Many people who see the neighbours chucking out their teenagers so that they can get their children's accommodation paid for on the rates will think highly of the Government's proposals to make those teenagers think again and stay at home.
Will he explain that the legislation will strengthen the hands of councils, which can often find alternative accommodation outside their immediate area for people who seek accommodation, but cannot insist that people take the houses which are available? In all those ways, he will bring down the artificially inflated numbers on the housing lists and please the great majority of the British public who have to fork out for these things.

Sir George Young: I am grateful to my hon. Friend. The homeless persons legislation was never meant to provide permanent accommodation for those who visit this country temporarily. As for local authorities' scope to use accommodation outside their boroughs, I hope that the local authorities will try to rehouse people in the area in which they live rather than place them outside. I recognise that in some boroughs that may not always be possible, but wherever the surplus accommodation is, we must make better use of it. We must make better use of the half-million empty properties, many of which could be used for those in housing need.

Mr. Ronnie Campbell: Is the Minister aware that last week my local authority had a debate on housing, and that Liberal Democrat councillors tabled a resolution on homeless people in Blyth Valley? In the past few years, homelessness there has trebled and the lack of housing has serious consequences for the borough.
The resolution asks me, as the Member of Parliament, to ask the Minister for Housing, Inner Cities and Construction when he will release capital receipts so that Blyth Valley and other authorities can build council houses for single people, and so that those people do not have to run around under the Rachmanism and profiteering of landlords?

Sir George Young: As I explained, there has been a downward trend in homeless acceptances in the past eight quarters, and, by and large, acceptances are decreasing. I am surprised to hear that they have increased so sharply in Blyth Valley. Capital receipts are a familiar subject of debate between the Government and Opposition. In a nutshell, capital receipts do not always arise in areas of greatest housing need. Our policy allows us to recycle the receipts away from areas that often have them to those areas that do not, simply because that achieves the better use and targeting of available resources.

Mr. Den Dover: Following the Minister's consultation paper, can we have common waiting lists, with local authority and housing association tenants joining the one list?

Sir George Young: There was widespread support for the proposal that there should be common waiting lists, which would mean that people in housing need would not have to register with a local authority and all the housing associations in the area. We propose to make progress with that proposition, which has been widely welcomed.

Mr. Clive Soley: Why does not the Minister admit that the only reason for today's miserable statement is the collapse in affordable rented accommodation in both the public and private sectors? Since 1979, the figure has dropped by 2 million properties, yet at that time the Government dismissed such talk as "alarmist"—a word that the right hon. Gentleman used again today. Will he tell us who the alarmists are this time by putting the names of organisations that support his proposals in the House of Commons Library? Will he be judged by that, as his predecessors were, because in the past the alarmists have always been right?

Sir George Young: On being alarmist, the hon. Gentleman has perhaps read some of the literature put out by Shelter which states that our proposals would result in
families with small children huddled all night in shop doorways.
No proposition has ever led to anything that remotely resembles that. Shelter also alleges that the policy
would tear children apart from their parents.
Nothing in the proposals will have such an impact.
One of the hon. Gentleman's hon. Friends, the hon. Member for Bristol, East (Ms Corston) claimed in a recent debate that, as a result of the Government's policies,
old lorries, caravans and tents"—[Official Report, 29 June 1994; Vol. 245, c. 889]
would be used. There has been much alarmist propaganda, which I hope people will now recognise as untrue.

Mr. Gary Streeter: Is my right hon. Friend aware that, despite Opposition Members' comments, which were clearly prepared before he spoke, his statement will be widely welcomed, not only by our many constituents who have been waiting patiently on waiting lists for many years, but by local authorities, which are particularly keen to tighten up the rules on intentionality?

Sir George Young: I hope that local authorities will look at the details of my announcement. There has been a response to some of the concerns expressed by local authorities, and I hope that they will avoid the knee-jerk reaction that we have heard from many Opposition Members this afternoon.

Ms Estelle Morris: Does not the Minister accept that there is something obscene about a Minister for housing who takes time to produce legislation that argues about who should have the house —the needy or the even more needy? Will he not take on the proper responsibility of his role and ensure that next year he reverses the decline in resources that are made available to local authorities to build houses? Does he not accept that that is the real issue, and that that is what the people of this country expect him to do?

Sir George Young: The hon. Lady will have to await the statement of my right hon. Friend the Secretary of State for the Environment later in the year about resources that are available to local authorities. I disagree with what she said at the beginning of her remarks. Whatever the level of supply for social housing, one needs to have a fair system of accessing. At the moment, we do not have such a system, which we are now proposing.

Sir Peter Hordern: Does my right hon. Friend agree that the inescapable conclusion to be drawn from Labour Members' comments is that they believe not only that capital receipts should be released but that there should be a substantial increase in local government expenditure on public housing? [Hon. Members: "Hear, hear."] My right hon. Friend has only to listen to the assent for that proposition to realise that that is so. Does he agree, therefore, that it is absurd to suppose that the Labour party is seriously concerned about controlling public expenditure and not increasing taxation?

Sir George Young: At the end of this statement, a debate will be held on exactly those matters. I notice my right hon. and learned Friend the Chancellor of the Exchequer on the Treasury Bench. I am sure that he will press the Labour party on the issue raised by my hon. Friend— what are its proposals for public expenditure?

Mr. Neil Gerrard: Will not these proposals inevitably mean that many homeless families will be forced from one short-term, sub-standard tenancy to another? What effects does the Minister believe that that will have on the education and health of the children involved?

Sir George Young: There is no reason why the scenario painted by the hon. Member should arise. We placed an obligation on local authorities to find people suitable accommodation for a year, and in many cases the owner of property— the landlord— is happy to renew it. Under the private sector leasing arrangement, many leases in London run for three years.
Many of my constituents in temporary accommodation ask whether they can continue. to live in that accommodation rather than be rehoused in permanent accommodation owned by the local authority. it is a big mistake to assume that all temporary accommodation is bad and all permanent accommodation is good.

Mr. Tony Marlow: I welcome my right hon. Friend's statement, but will he tell the House how it will help service personnel who wish to return to their home towns to obtain accommodation?

Sir George Young: If my hon. Friend looks at the code of guidance that we issued to local authorities, I think that he will find specific reference to service personnel. He will know that my right hon. and learned Friend the Secretary


of State for Defence has made a number of proposals to help those leaving the forces to buy their own accommodation in the private sector. A wide range of schemes are available to help service personnel put down roots in areas where they want to live, and I know that my right hon. and learned Friend takes this subject particularly seriously.

Mr. Clive Betts: Will the Minister explain to my constituents, who live in an area with limited assured tenancies and limited private sector accommodation, where the wait for a council house is more than five years, precisely what will happen to homeless families in the first year after they are accepted as homeless, and in the period thereafter? That is not clear from the statement. If they are not given a secure council tenancy, what will happen to them?
The Minister referred to "more thorough" investigation of applications from people who live with family or friends. As local authorities such as mine— the best authorities— already conduct thorough investigations, what additional investigations is he suggesting they should make?

Sir George Young: On the first point, I have been particularly impressed with what has happened in Derby, which is not far from the hon. Gentleman's constituency. It has a good relationship with the private rented sector and is finding and taking advantage of property not previously available to homeless families. On the 12-month responsibility, the duty can recur if, after 12 months, there is still a difficulty with the local authority. On the final point, we propose to consult local authorities, which have a number of positive suggestions to make on how we can tighten the intentionality rules.

Mr. Julian Brazier: Does my right hon. Friend agree that the Housing (Homeless Persons) Act 1977, which he announced he is seeking to amend, was the origin, both in time and in cause, of an unparalleled explosion in illegitimacy and the breakdown of family life in this country? Will he accept from me that thousands of my constituents will be delighted to hear that we are bringing some justice back into the allocation of what will always be a scarce resource?

Sir George Young: The original legislation was never meant to be the main route into social housing; it was meant to be a safety net. Although the number of lettings has remained broadly constant in the past 15 years, the number of acceptances has increased dramatically because people have seen it as a faster route into social housing. It was never meant to be that.

Mr. Gerry Sutcliffe: Will the Minister tell me and the 9,000 people in Bradford who want housing how many of them will be rehoused as a result of today's statement? Is not the truth that the forward-thinking local authorities that the right hon. Gentleman mentioned today have considered the whole picture of housing— housing need and the need for houses — whereas the statement concentrates on one aspect? To ensure justice, the whole picture is to build houses. When will we hear something from the Government about when they will allow councils to build houses for people such as the 9,000 homeless people in Bradford?

Sir George Young: However many houses are built in Bradford, there must be a fair system for allocating them. That is why I believe our principles are justified, at whatever level of supply. I was recently in the hon. Gentleman's constituency in Bradford, where I opened a new housing association development built under city challenge. The Government are making extra resources available to the hon. Gentleman's city to meet the housing need to which he has just referred.

Mr. John Marshall: I thank my right hon. Friend for his statement. Does he agree that people who are seeking social housing would benefit if housing authorities were more efficient? Is my right hon. Friend aware that there are thousands of empty council houses in London? If local authorities were also to collect their rents, they could improve some of those houses.

Sir George Young: I warmly welcome the common sense in my hon. Friend's suggestions. Of course we need to maximise resources for housing and collecting the rents do that. Of course we need to maximise the use of homes which have already been built. Bringing empty properties back into use does that as well.

Mr. Stephen Timms: Does the Minister accept that securing a permanent home is a matter of paramount importance for the overwhelming majority of families in the United Kingdom? Does not his statement herald the creation of a whole tier of families who will simply be shuffled from one temporary let to another and never have the prospect of securing the permanent home they need?

Sir George Young: Securing a permanent home is indeed a valid objective which many people share. That is why it is important that securing the permanent home should be allocated on a fair basis.

Mr. Bernard Jenkin: Does my right hon. Friend agree that his statement represents a substantial step towards a more rational allocation of housing in the United Kingdom? Does he also agree that only those most obsessed with political correctness are against the proposals? Would it not be better if they allocated more of their efforts to ensuring that the voids in public housing, particularly in Labour authorities, were available to the homeless, particularly in London?

Sir George Young: In order to persuade Opposition Members, I have quoted from The Guardian, I have quoted from the chairman of the Labour party and I have quoted the hon. Member for Southwark and Bermondsey (Mr. Hughes). If I wanted to, I could quote Mr. Robert Kilroy-Silk—[laughter]—but I will not. There is a very broad range of political support for the proposals that I have just put forward.

Mr. John Denham: The Minister must be aware of many cases, in respect of repossessions and marital breakdowns, when families have been taken into accommodation by relatives and friends. Does not the Minister's intention to tighten up the rules on intentionality say to those people, "Don't accept relatives into your homes for fear that they will never be rehoused unless you are forced to go to court against your own family or friends to evict them from your own home"?

Sir George Young: I understand that point entirely. There will be no need to obtain a court order in the circumstances that the hon. Gentleman has just described.

Mr. Toby Jessel: As for the housing of ex-service men, is guidance enough? Will my right hon. Friend consider what can be done to make local housing authorities act more justly towards ex-service men and their families, when those men have been serving this country abroad? Is it not quite wrong that local housing authorities, many of which care nothing for the defence of this country, should be able to put such people at the back of the housing waiting list because of the lack of residential qualifications?

Sir George Young: I believe that we issued a revised code of guidance to local authorities last year on precisely the subject that my hon. Friend has raised. Of course I will consult my right hon. Friend the Secretary of State for Defence to see whether we need to take any further steps to provide accommodation for those who are leaving the services.

Mr. Barry Jones: A Welsh Office Minister should be on the Government Front Bench for a statement of this importance, bearing in mind the growing housing crisis in Wales. Does the right hon. Gentleman understand that our surgeries are crammed with people begging and pleading for affordable housing? The right hon. Gentleman's statement today makes it harder—not easier—for right hon. and hon. Members to help the homeless. Is not this cruel and brutal statement in effect a job application to join the Cabinet?

Sir George Young: I think that I am right in saying that, on Thursday 7 July, there was a half-day Supply day debate on housing in Wales. I am sure that my right hon. Friend the Secretary of State for Wales and the Minister who replied to the debate explained exactly what we are doing to help people in Wales who are in housing need.

Mr. Mark Wolfson: Does my right hon. Friend agree that the major benefit of his proposals is that they address the key issue that homeless people have had unequal priority over many other deserving cases looking for social houses? I welcome my right hon. Friend's statement on that basis.

Sir George Young: I am grateful to my hon. Friend. At the moment, those who fall within the legislation are rewarded, in effect, with a tenancy for life in publicly funded housing, at the expense of others whose underlying need might be the same or even greater.

Dr. Lynne Jones: The Minister will be aware that, in Birmingham, we have successfully avoided the use of bed-and-breakfast accommodation for housing homeless families. Therefore, is the right hon. Gentleman concerned that, in his submission to the consultation, the outgoing director of housing, Derek Waddington, said that, if the proposals are implemented, he doubts whether Birmingham can continue to avoid using such accommodation.
How can the right hon. Gentleman's proposals be consistent with obligations under the Children Act 1989 when there is evidence that families living in temporary accommodation, because of the insecurity they suffer, are under considerable stress? Instead of taking us back to the era of "Cathy Come Home", would it not be better to

ensure that local authorities can supply good-quality housing by using their capital receipts or borrowing on the back of their assets, and taking on board the rental income that will result from such homes being built?

Sir George Young: I do not agree with first part of the hon. Lady's assertion. Many people expect that, because there is no longer a guarantee of permanent accommodation, the homelessness route will not be quite as attractive as it is at the moment. There is substantial investment in housing in Birmingham. As the hon. Lady will know, the Castle Vale housing action trust is receiving additional funds over and above what Birmingham city council receives in the usual way.
I have dealt with capital receipts. If the hon. Lady wants to make the case for greater public investment in housing on behalf of the Labour party, I hope that she catches your eye, Madam Speaker, in the debate.

Mr. Keith Mans: Does my right hon. Friend agree that his proposals will be widely welcomed in the north-west, particularly in my borough of Wyre, because they draw a clear distinction between the statutory right of boroughs to house the homeless and the position of families on the waiting list, which is a completely different matter?
Does my right hon. Friend also agree that his proposals will mean that councils and other organisations in the public and private sectors will move closer together to find permanent accommodation for the homeless, rather than trying to put them as high as possible up the waiting list for council houses?

Sir George Young: It will certainly be the case that local authorities will have greater discretion to allocate housing on the basis of need than they have at the moment. I hope that they will work closely with the private rented sector to broaden the base of housing available for those in housing need.

Mr. Max Madden: Does the Minister accept that many people will regard his statement as a pathetic response to the gravest housing crisis in post-war Britain? While scapegoating the homeless, lone parents, beggars and other vulnerable people, why do the Government constantly reject the example of previous Conservative Governments, for instance that led by Harold Macmillan, who launched major house building programmes? Why does the right hon. Gentleman refuse to combine capital receipts with unemployed construction workers, and build thousands of decent homes at affordable rents and prices for the thousands of British people in desperate housing need?

Sir George Young: Perhaps the hon. Gentleman will explain how that great programme will be funded. We have had no clear answer to that point each time we have debated housing.

Mr. John Fraser: Perhaps the answer is that such a programme might be funded by the housing benefit that would have to be paid for rehousing homeless people in private accommodation.

Sir George Young: The hon. Gentleman will have seen the estimates we made when we published the document earlier this year, when we estimated that the impact would be broadly neutral.

Several hon. Members: rose—

Madam Speaker: Order. We are now going to move on.

Personal Statement

Mr. Peter Hain: With your permission, Madam Speaker, I wish to make a personal statement.
On 13 July, during the debate on Members' interests, I stated that I had placed letters on the letter board giving notice of my intention to refer to certain hon. Members in the course of the debate. I said that I had done so earlier that evening, and well in time. In fact, although I had every intention of notifying the hon. Members concerned, I found to my surprise that the letter board was closed, when I sought to leave letters there, and I handed in the letters at the Post Office.
I owe you and and the House a full apology in two respects, Madam Speaker. I inadvertently misled you when I stated that the letters had been left on the board; furthermore, I now recognise that letters left at that stage of the evening provided a totally inadequate warning in this case.
I deeply regret my actions, Madam Speaker, and repeat my sincere apology to you and the House.

Points of Order

Mr. George Foulkes: On a point of order, Madam Speaker. I should be grateful if you would give some thought to a problem that has arisen in relation to the boundary between the legislature and the Executive, and is causing concern to some of my colleagues and to me.
Until a few years ago, parliamentary private secretaries were appointed only by senior Ministers, and—as I understand it—the Minister concerned made the appointment personally. Parliamentary private secretaries were not members of the Government. Over the past few weeks, however, it has become apparent that some consider them to be so, and there have been reports of their being appointed, and sacked, by either the Chief Whip or the Prime Minister.
A list of members of the Government is regularly published in the Official Report. I think that it should be made absolutely clear—it may be worth your while to give some thought to this, Madam Speaker—that parliamentary private secretaries either are or are not members of the Government. If they are, certain rules, regulations and other considerations apply; if they are not, they have certain rights and responsibilities of a different kind. I think that the matter is important, Madam Speaker, and I should be grateful for your thoughts on it.

Madam Speaker: I do not need to give much thought to it. Parliamentary private secretaries certainly are not members of the Government.

Mr. Nicholas Budgen: On a point of order, Madam Speaker. I wonder whether there has been any indication that a statement will be made on the appointment, or election, of Mr. Santer as President

of the European Commission. You will recollect that there was much public interest in the vetoing of Mr. Dehaene, and I assume that the Government will wish to explain their reasons for selecting Mr. Santer. If they do not, it is extraordinary that Opposition Members—in whose hands the matter really is—have not insisted to the Leader of the House that the bipartisan non-discussion of Europe should end—

Madam Speaker: Order. The hon. Gentleman asked me whether I was aware that a statement would be made; I have not been informed by the Government that they intend to make a statement at this stage.

Mrs. Helen Jackson: On a point of order, Madam Speaker. I wish to raise an issue that I raised more than three weeks ago with the Home Secretary by means of a parliamentary question; I also tabled an early-day motion, which has now been signed by more than 70 hon. Members. It is a serious issue. It concerns the use of forensic pathology photographs of murder victims in a leisure context. There is immense concern—

Madam Speaker: Order. I really cannot allow the hon. Lady, or any other hon. Member, to abuse points of order in this way. If the hon. Lady will come to the matter that is for me to deal with, without giving an explanation of the photographs or the early-day motion, I will attempt to deal with it; but I fear that she is abusing a point of order.

Mrs. Jackson: Thank you, Madam Speaker.
Although responses were received from the Secretary of State for Health, police officers, the Police Federation of Englsand and Wales and the British Medical Association, the Home Secretary has not even had the courtesy to write a letter.

Madam Speaker: I am sure that the hon. Lady herself is quite capable of pursuing the matter with a Minister. It is by no means a point of order for me to deal with.

Dame Elaine Kellett-Bowman: rose—

Madam Speaker: Is this a point of order?

Dame Elaine Kellett-Bowman: I believe so, Madam Speaker. I was just wondering whether there had been any consultation with the Government on the appointment of the right hon. Member for Islwyn (Mr. Kinnock) to a £103,000-a-year job as a Commissioner.

Madam Speaker: That is nothing to do with me. It is certainly a bogus point of order if I ever heard one.

Mr. David Jamieson: rose—

Madam Speaker: Is this another one?

Mr. Jamieson: Not a bogus one, Madam Speaker.

Madam Speaker: Hon. Members may recall that I told the House last week that I hoped that its behaviour would start to improve on Monday this week. I am afraid that my words fell on fairly stony ground. I take this matter very seriously; I hope that the hon. Gentleman has a genuine point of order.

Mr. Jamieson: This is a genuine point of order, Madam Speaker. Is it in order for the Chancellor's parliamentary private secretary, the hon. Member for Amber Valley (Mr.


Oppenheim), to hand out pre-prepared questions to Conservative Back Benchers? If it is not, perhaps you can give us some guidance.

Madam Speaker: That is not a matter for me: it is a question of party discipline. I have seen lots of papers and early-day motions floated around on both sides of the House. When I first came to the House, one would not dream of showing someone an early-day motion in this Chamber; one would have been sent off with a flea in one's ear if one did. Members are in this Chamber to pay attention to what is taking place, not to sign early-day motions. [HON. MEMBERS: "Hear, hear!"] Good, that has not fallen on stony ground.

Orders of the Day — The Economy

[Relevant document: The Minutes of Evidence taken before the Treasury and Civil Service Committee on Tuesday 5th July (House of Commons Paper No. 561-ii).]

Madam Speaker: I have selected the amendment in the name of the Leader of the Opposition, the right hon. Member for Derby, South (Mrs. Beckett). Also, I have had to impose a ten-minute limit on speeches between 7 pm and 9 pm; I hope that those speaking at other times will exercise voluntary restraint.

The Chancellor of the Exchequer (Mr. Kenneth Clarke): I beg to move,
That this House welcomes the publication of the Government's latest economic forecast, which shows growth continuing at a steady and sustainable rate and inflation remaining within its target range; and congratulates the Government on its economic policies which have laid the foundations for the non-inflationary growth, rising industrial production and falling unemployment that is now being seen.
I tend to agree with you, Madam Speaker, that many of the old ways are the best, but this summer economic debate is an innovation. It is the first so-called summer debate on the economy held in the House and it is intended to be an annual event, although I have no doubt that we have all attended the first annual dinner of organisations that have never held another. I think that this debate will last, however, as it is a sensible procedural consequence of moving to the unified Budget in November of each year.
As we have not debated the economy for some time, it also usefully fills the gap left between the Budgets that we now hold in November each year. In former times, during Labour Governments those gaps were filled by frequent Budget statements throughout the year, each correcting the Budget judgment in the previous statement. Those were a feature of Labour's mismanagement of the economy in the 1970s.

Mr. Robert Sheldon: rose—

Mr. Clarke: With respect to the right hon. Gentleman it is a little early in the debate to give way. [HON. MEMBERS: "He was a Minister]. A very long time ago, at the time about which I was complaining.
This debate will give hon. Members the opportunity to discuss the outlook for the economy now. We shall certainly relish the opportunity, for the same reason that the Opposition will not do so. The Government have a coherent economic strategy—the Opposition do not—and our strategy has delivered what are, potentially, the most favourable set of economic circumstances that Britain has enjoyed for more than a generation.

Mr. Sheldon: I will be very brief.

Mr. Clarke: The right hon. Gentleman is a very respected former Minister. May I contrast my situation to the one that he faced so many years ago. At this stage of recovery from recession, no Government since the war have produced an economic climate that combines steady growth with falling unemployment, rising productivity and low inflation of the type that we now have.

Mr. Sheldon: I am sorry to interrupt, but many people do not realise that it is seven months since we last had an economic debate, in December last year. As the right hon. and learned Gentleman pointed out, there was a time when we had frequent economic debates—perhaps too frequent —but we must move somewhere between the two extremes and that is worth mentioning at the beginning of his speech.

Mr. Clarke: During Labour Governments, we had very frequent economic debates and statements. I remember one occasion when a Labour Government made a fresh Budget statement before they had even finished debating the Finance Bill that flowed from the previous statement. I was pointing out that we have moved rather a long way from that—

Mr. Stuart Randall: My right hon. Friend made a serious point.

Mr. Clarke: On the serious procedural point, I agree that it is surprising that the House has got itself into a position in which there is a long debate on the Budget in November and a one-day debate in the summer. It is not for me and the shadow Chancellor to decide, but for the usual channels. I have suggested to my opposite number on at least one occasion that we might drop one day from future Budget debates and transfer it to the summer economic debate. That is a matter for the Select Committee on Procedure, the usual channels and others.
There have been many Supply day debates since the Budget. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) is correct. It is extraordinary that the Labour party, which at times has had to scrape the barrel to find something to fill its allocation of Supply day debates, has kept away from economic policy and the state of the economy. I repeat my allegation: it is because the British economy is doing well, and because Labour has absolutely no alternative policy to put forward.
I have described the extremely good combination of circumstances which we have at present.

Mr. Gordon Brown: rose—

Mr. Clarke: I shall give way in a moment.
The circumstances that I have described, which are confirmed by most outside observers of our economic situation, mean that we have grounds for cautious optimism at present. I regard that as a beginning. We must stick to the Government's successful economic strategy and deliver the increased prosperity and secure jobs which it should now be possible for us to deliver over the next few years, if international conditions allow. I believe that we are now poised for success. I do not believe that the Labour party has any alternative to our policy, but I am content to give way to the hon. Member for Dunfermline, East (Mr. Brown) if he wishes to put me right.

Mr. Gordon Brown: To put the record straight, will the Chancellor tell the House which of the Labour debates on education, housing, health and the Child Support Agency he regards as scraping the barrel? Which debate is irrelevant to the public spending needs of this country?

Mr. Clarke: The debate on the Child Support Agency covered a policy which had been supported by the Labour party and which had already been considered by a Select Committee. Is the hon. Gentleman claiming that at shadow Cabinet meetings he has been demanding time on the Floor

of the House to put Labour's alternative economic strategy but unfortunately he has been fought off by his colleagues who found desperate matters to bring before the House? Of course he has not.
I have had a lot of jobs in government, as people always point out. I have never held a ministerial post where I have taken part in fewer debates on the Floor of the House. Even when I was the Parliamentary Under-Secretary of State for Transport, my opposite number used to challenge me on more occasions than the hon. Gentleman does. That is because he knows that what I have just said is right: things are going very well and the outlook is very promising. That is the result of the Government's policies. The hon. Gentleman has absolutely no alternative to them which he is prepared to put forward.

Mr. Nicholas Budgen: Will my right hon. and learned Friend give way?

Mr. Clarke: I shall give way once more and then I must be allowed to get on.

Mr. Budgen: As so many members of the public look for a less adversarial approach, would it not be generous to remind the House that support for the exchange rate mechanism, which was the feature of most hon. Members in the House, came particularly from Labour Members, and it is their embarrassment at having abandoned the official role of Opposition and having supported the Government in that disastrous policy which now prevents them from either criticising the present policy or, indeed, mentioning the past?

Mr. Clarke: I shall touch on my hon. Friend's favourite subject during my speech. He and I have never agreed, but he is right to point out that we always had the complete support of the Labour party on every aspect of our membership of the exchange rate mechanism. Indeed, I believe that Labour is still committed to signing up to the Maastricht treaty, including the timetable for the exchange rate mechanism, despite the fact that no other member state is following that course at present.
Turning to mainstream economic policy and the economic situation—I did not intend to be too combative in my introductory remarks, which I thought were non-controversial—growth looks set to continue at its current healthy rate. Independent forecasters and the Government now expect growth to be higher than we were forecasting at the time of the Budget. They also expect growth to exceed the rate of inflation in 1994. That sounds as though growth in the economy exceeding inflation should be the norm. In fact, it has happened in the United Kingdom on only four occasions since 1960, and usually only because growth has been unsustainably high at times of boom, rather than inflation being low.
We now have a healthier situation. Growth is becoming increasingly balanced and the recovery is spreading throughout the economy. Exports and investments are strengthening, and export volumes from this country are now growing at an annual rate of 9 per cent., despite some continuing weaknesses in our most important European markets.
Investment looks set to grow faster than consumer spending in this year. As we say repeatedly and without any fear of sensible contradiction, Britain is now leading Europe out of recession. The European Commission, the International Monetary Fund and the Organisation for


Economic Co-operation and Development expect our growth rate to be the fastest of any major economy in Europe this year.
We have the fastest rate of industrial production and the fastest increase in retail sales of all major European countries. Ours is the only major European economy where unemployment has fallen in the past year, and it has now fallen by 330,000 since the last cyclical peak. Despite that pick-up in growth and the welcome fall in unemployment, the outlook for inflation also remains favourable.
Our inflation rate is well below the European Union average and it is at historically remarkable low levels for the United Kingdom. Sound money has been complemented by sound public finance. I am pleased to say that the Budget deficit remains on track to return to balance in the medium term. The combination of steady growth, healthy public finances and low inflation is the result of the Government's economic policies. It has not happened by chance, and it most certainly would not have occurred if we had followed the advice of any of the Opposition parties.
Sound money, sound finances and supply-side reform of the economy are the principles that guide our economic policy. We in government understand that, to achieve growth in living standards and to sustain rising industrial production, one needs low inflation and low public sector borrowing. One cannot have prosperity without sound policies.
This time last year, I said that Labour's economic strategy had about as much content as the average telephone directory. A year on, things have changed. A telephone directory now seems like a good read in comparison. The last time I addressed an audience of any size, a Socialist Worker demonstration burst in upon me, and there were rather more people involved than there are Labour Members in the Chamber at the moment. More to the point, they were the first people from a left-of-centre movement who appeared to have at least a clear idea of what they wanted and what alternative policies they had whom I had met for a long time.
The hon. Member for Dunfermline, East has yet another chance to put forward alternative policies, and he needs to do the House the courtesy of addressing them. He needs to address the fundamentals of policy which, as the Chairman of the Public Accounts Committee has said, we should talk about on the rare occasions when we debate the issues.
The least that we could expect from the shadow spokesman of the principal Opposition party is for him to say whether he would do anything that the Government are not currently doing with regard to public borrowing, public spending or monetary policy. In my opinion, if he suggested anything which deviated significantly from the course upon which the Government are set, it would only threaten our sustained economic recovery.

Mr. Randall: Probably everybody in the House would accept that the right hon. and learned Gentleman's notion of steady growth is laudable. What some of us are genuinely worried about is the rate of that steady growth; whether it will ever be sufficient to reduce unemployment to a reasonable level and the social impact of that. What does he have to say on that?

Mr. Clarke: That is an important subject, to which I shall, if I may, return later. We are forecasting at the moment growth of 2.75 per cent this year. Nobody knows

exactly what the trend growth is, but beyond that it comes to a point where it is not sustainable without risk and without a threat to inflation.
Fortunately, we already see that present levels of unemployment are falling as a result of that growth, and 330,000 was the figure which I have cited. But I agree that there is also a structural problem and, as we achieve sustained growth, we must take measures to make sure that we do not have a strong recovery with unemployment stuck at 8, 9 or 10 per cent. I shall return to that in a few moments. The Government have, in my opinion, coherent policies on that matter, which are gaining favour in international discussions.

Mr. Peter Hain: rose—

Mr. Clarke: I thought that the hon. Gentleman was rising to answer on behalf of his hon. Friend the Member for Dunfermline, East the questions I asked about spending, borrowing and monetary policy. I do not believe that the Opposition have got a policy on unemployment either. They would do well to follow our own.

Mr. Hain: Will the right hon. and learned Gentleman give way?

Mr. Clarke: I should like to make some more progress, but I will give way steadily.
On inflation, upon which I face silence, as always, from the Opposition, only the Conservative party, Madam Speaker, is the party of low inflation.

Mr. Deputy Speaker (Mr. Michael Morris): Order. I am sorry to interrupt the Chancellor, but Madam Spealcer left the Chamber 15 minutes ago, and I should be grateful if he adjusted his script.

Mr. Clarke: Mention of transvestites in politics, Mr. Deputy Speaker, caused a disturbance at the LSE, and I do not intend to make any similar reference today. I apologise to you for addressing you as Madam Speaker.
As for low inflation, the record is extremely clear. Only the Conservative party is the party of low inflation and the figures speak for themselves. Under the previous Labour Government, inflation averaged 15.5 per cent.; inflation is now 2.5 per cent. and underlying inflation is 2.4 per cent. Since we came to power in 1979, the average rate of inflation has been 6.6 per cent.
Those low levels of inflation are not some abstract matter, because they have a real effect on people's lives. Let me give some obvious examples. The fierce competition between supermarkets has resulted in many food prices falling. Competition in the high street has meant that the prices of many goods, such as clothing and footwear, have hardly increased in the past year. Competition between manufacturers means that factory price inflation is at the lowest level we have seen for 25 years. All that low inflation brings real benefits to the shopping bags of real people at every level of income in our society.
The Conservative party also recognises the wider benefits that low inflation can bring. It brings the stability that our business leaders need if they are to invest with confidence in the future of our country. It provides stability for savers, whose resources finance investment and wealth creation. We do not support low inflation for economic reasons alone, although there are good economic reasons for achieving it, but because inflation is worse than a tax on


those with fixed incomes, and is particularly hard on the weak and the poor. Inflation randomly redistributes wealth from that group to those with the economic muscle to withstand its debilitating effects, as we saw only too clearly in the late 1970s.
Let us never forget that, under the Labour Government of the 1970s, inflation was higher than interest rates on many occasions, so the real value of the savings of retired people fell. That is not the case now and I trust that it never will be again. Let me reaffirm that the Government have set themselves a target to keep inflation within the 1 to 4 per cent. range and to reduce it to the lower part of that range by the end of the current Parliament. We are determined to stick to that target, but what of the Labour party? Does it have a target for inflation? How does it propose to control inflation? The Opposition certainly will not do that by caving in to demands from their friends in the trade union movement, but their reaction to an 11 per cent. pay claim, which has come out of the blue at the moment, has hardly given anyone any grounds for assurance.
I hope that the hon. Member for Dunfermline, East will set out some policy. What does he think of our inflation target? Is it too high? Is it too low, or is it about right? Would he accept that target? I am sure that all hon. Members would like to hear that answer.

Mr. Tam Dalyell: On the issue of competition, is there any unease in the Government about the circumstances in which William Low, which is, after all, a large grocer retailer in Scotland, is about to be swallowed up by either Tesco or Sainsbury? Is there any unease about what might happen further to competition in the retail trade as a result of that? All I am asking is whether this matter is being looked at in government, because it surely should be.

Mr. Clarke: We have an extremely clear competition policy. We seek to stimulate competition for the reasons that I have given, but that does not include all takeovers and all reorganisations of businesses. As the hon. Gentleman knows, that is a matter for the Department of Trade and Industry, which considers it in the normal way. It is for my right hon. Friend the President of the Board of Trade to decide whether any particular merger should be referred to the Monopolies and Mergers Commission. I have no views on a particular takeover, including that named by the hon. Gentleman.

Mr. Bernard Jenkin: I should like to congratulate my right hon. and learned Friend on his remarkably successful record of keeping inflation down, despite, incidentally, the 15 per cent. devaluation of sterling since coming out of the exchange rate mechanism, which bears out the monetarist analysis. What does he make of the state of the markets, particularly the high levels of long-term interest rates? When does he think that the markets will take on board the fact that we are serious, as I believe, about defeating inflation?

Mr. Clarke: I am glad to say that the markets have strengthened slightly from the worst situation encountered. As my hon. Friend is aware, there have been international fluctuations in the marketplace ever since the Federal Reserve bank first moved its short-term rates a few months ago. It is arguable that it over-reacted to a situation that had

built up in the previous year. As my hon. Friend the Member for Colchester, North (Mr. Jenkin) said, the best reassurance that we can give the markets is that we are committed to our inflation target. We have an extremely good record of moving towards it, despite all the pressures of the past few years. I am quite sure that we can sustain confidence in that policy. I am glad to see that long-term rates have eased in the past few days.

Mr. Gordon Brown: rose—

Mr. Clarke: I will give way in a moment.
One of the steps that I have taken to reinforce our inflation policy has been to start publishing the minutes of my monthly meetings with the Governor of the Bank of England. I have done that to make it quite clear that the monetary authorities in this country should take their decisions on sensible judgments of the economic priorities of the moment, not give way to short-term political pressures. The result is that we are more open and we are discussing such matters more than we have ever done before.
We are certainly more open than the Labour party, so I hope that the hon. Member for Dunfermline, East will at last contribute to the debate on monetary policy by getting up and telling me what he thinks of our target for inflation. Is it too high, too low or about right?

Hon. Members: Answer.

Mr. Gordon Brown: But why are the Government's inflation forecasts completely different from those of the Bank of England? Why are the Government predicting that inflation will just be 2 per cent. at the end of next year, but the Bank of England is now predicting that it will be as high as 3.5 per cent., far beyond the Government's target range? Is that not because the Government are assuming now that interest rates will rise? Will the Chancellor now answer the question that was put to him by his hon. Friend the Member for Colchester, North (Mr. Jenkin): why have British long-term interest rates risen faster than in any other country except Canada?

Mr. Clarke: The hon. Gentleman knows that forecasts have a wide range of accuracy. [Interruption.] Of course they do. He will also know that every forecaster has been reducing inflation forecasts since the end of last year—they are all bringing down their forecasts of inflation for the future. At the moment we are plainly on course. Every recent forecast that I have seen stays well within the Government's inflation target, upon which the hon. Member for Dunfermline, East declines to make any comment.
I have already dealt with the recent behaviour in the markets. It is true that, at first, our bonds fell further and our long-term rates went up somewhat higher than did the rest in western Europe. That is because of our country's history of high inflation, which goes back in particular to those irresponsible years when the Labour party was in office. Then, as I have cited, we were a byword for high inflation and poor economic performance. Our current policies are restoring confidence. We have a monetary policy; the Labour party does not. We are staying in power and we will ensure that our inflation targets are hit.

Mr. Gordon Brown: Will the Chancellor just answer the question? Why are long-term interest rates in Britain higher than they are in France and in Germany?

Mr. Clarke: They always have been since the war, but we are very much more in line with the rest of Europe than we have ever been before, and the confidence that this country will achieve sustained growth and low inflation is very much higher than it has been for a generation. A return to a Government of the Labour party and a move to the Treasury by the hon. Member for Dunfermline, East, if that were ever seriously contemplated, would shatter the confidence that we have built up. I am quite sure that it would have an extremely adverse effect on bond markets, long-term interest rates and business confidence as well.
Low inflation is not an optional extra. We have achieved our present low inflation—well below the forecast that people were making this time last year and even at the time of the Budget—as a result of the disciplines of, first, the exchange rate mechanism but, secondly, the tight monetary framework which my predecessor, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), so promptly put in place after we had been forced out of the exchange rate mechanism. Low inflation is the necessary condition for the sustained economic growth that the Government now wish to see as we approach the next century and beyond.
The Conservative party does not believe that there is a trade-off between growth and inflation, as so many Opposition Members still seem to believe. We shall not try to boost growth artificially by stoking up demand and thus jeopardising our inflation performance. We believe that sound public finances are necessary for sustained growth, which is why action had to be taken in the past two Budgets to improve public finances. Our borrowing was increasing by too much as a result of the prolonged recession, which was experienced, to varying degrees, by all western countries.
Every major country in the west must now tackle Government indebtedness. All the G7 and European Union countries are taking painful action to restore their public finances to order. I could almost claim that no other European Union member state has taken such decisive and effective action to reduce its fiscal deficit as this country has, but that may be unfair to my German colleagues, who are also taking rigorous action. Many countries that have not taken that action will have to do so.
Because we have acted so decisively, promptly and effectively, there is now high confidence in the British economy in both the business and financial worlds. When we debated the economy only 18 months ago, we all agreed that confidence was the missing factor needed for our recovery to take off. The following two necessarily tough Budgets were an important part of restoring the confidence that was so vital for recovery.

Mr. George Foulkes: If the economic indicators are as good as the Chancellor says, why does not he end the anguish for the poor and elderly by saying that he will not increase VAT on fuel to 17.5 per cent? Will he make that statement now?

Mr. Clarke: I give the House a presentation on the fiscal prudence necessary to maintain confidence and keep the recovery going, and a Labour Member gets up and suggests that we should abandon one of the tax increases. A few moments ago, my right hon. Friend the Member for Ealing, Acton (Sir G. Young) made a statement on housing policy, and rows of Labour Members agreed that there should be a massive increase in spending on public

housing. The Labour party's lack of policy and its instinct to abandon sound fiscal policies and controls on public spending pose a great threat to the recovery.
Labour Members have the nerve to claim that taxes would somehow be lower under a Labour Government. That is preposterous, as history and their current behaviour demonstrate. Taxes would have to be increased to pay for the never-ending list of spending demands revealed by every exchange in this House; otherwise, public borrowing would rocket to unsustainable levels and high interest rates and inflation would return.
I do not understand why the Labour party has got into such a knot about this. The Labour movement is going through an identity crisis. Clearly, Labour is the party of high Government expenditure—higher than its opponents in the Conservative party. Members of the Labour and trade union movement believe that more state spending is required to solve many of the country's problems. Labour Members nodded in assent when my right hon. Friend the Member for Acton accused them of wanting to spend more on public housing only a few moments ago. If they no longer believe in socialism, surely they must still believe that they are the party of higher public spending.

Mr. Tony Benn: Will the Chancellor give way?

Mr. Clarke: I shall give way to the right hon. Gentleman in a moment because he has the courage to agree with me.
To what has the Labour and trade union movement been reduced if it now cringes in shame at the suggestion that it wishes to increase public expenditure, compared with a Government whose Ministers served under Lady Thatcher? Of course a Labour Government would increase spending dramatically, but Labour Members are no longer prepared to say that they believe that. It would happen as a result of their negligence if they ever came to power. I give way to a man of principle.

Mr. Benn: Will the Chancellor deal with two questions about taxation: what is it for; and who pays it? Why should pensioners pay VAT to buy a Trident? Why should not better-off people pay more to provide for the education and health that the whole community needs?

Mr. Clarke: Of course we all accept that certain expenditure is necessary, and we have hugely increased expenditure on key public services like the national health service, education and social security, including a greatly increased take-up of improved benefits for the disabled. We have delivered all those policies. In the real world, however, a balance must be struck between a sustainable level of growth in a successful enterprise economy, and the efficient delivery of public services. We are striking that balance. We can improve the quality of many aspects of people's lives while reducing the state's total take from gross domestic product to allow the private sector to flourish further.
That is not and never has been the Opposition's policy. When they were last in power, they took the state's take up to higher levels than we have ever taken it. Last week, we saw their reaction to defence expenditure, which was to say that it would be approached on the basis of how many public sector jobs it provides in the administrative back-up


to forces, whereas we prefer to spend the money on the front line's kit, training and weaponry, while running our defence forces efficiently.
Our spending proposals are clear. Keeping public expenditure under control is the key to healthy public finances and lower taxes. Because we believe that lower taxes help incentives, we will lower taxes when the opportunity occurs—we will and we have—but only when it is prudent to do so. The Opposition's spending proposals would not do that—[Interruption.] If Opposition Members disagree, I wait to hear their spending proposals. Our public expenditure ceilings have just been agreed by the Cabinet. Are they too high or too low? I have no idea of the view of the hon. Member for Dunfermline, East. I hope that he will enlighten us.
The third pillar of our economic strategy is on-going reform to the supply side of the economy. Since 1979, we have put in place a raft of measures designed to improve the performance of our businesses and to attract business from abroad. Successful macro-economic policy gives us an opportunity to take that forward. Privatisation and private finance are key factors in the British economy's steadily improving performance.
When we started our privatisation programme, it was the most ambitious programme of its kind in the world, but privatisation is now the norm everywhere, except in the British Labour movement. Forty-seven companies have now been transferred from public to private ownership. We used to spend nearly £2 billion a year—£35 million a week —propping up those state-owned industries. They now contribute more than £2.5 billion a year—£50 million a week—in taxes to the Exchequer. The main difference is that they have changed beyond recognition. As corporate entities, they now provide better quality for their customers and many are now strong international companies.
Britain also has better industrial relations now than it has had in its industrial history. Co-operative attitudes between management and work force are better than I can remember in the history of British industry. We have achieved all that by sweeping away many of the legalised institutional divisions between what people on the continent still call "the two sides of industry", which many would like to reintroduce in the name of the European social chapter. As a result of our reforms, industrial stoppages are now at their lowest level since records began almost 100 years ago.
However, improved industrial relations are only one plank of our labour market reforms.

Mr. Mark Wolfson: Will my right hon. and learned Friend give way?

Mr. Clarke: I shall give way later.
We fought in Europe, and we shall continue to do so, against the imposition of unnecessary labour market regulations, which impose additional costs on employers, and ultimately destroy jobs. We understand that job creation is the key to improving the fortunes of the low paid. Placing burdens on employers only prices the low paid out of work and creates more misery, not less.
Our approach to labour market flexibility—to deregulation of those markets—is being followed increasingly throughout the world. It was endorsed at the job summit in Detroit; it was endorsed at the recent Corfu

summit in Europe; it runs all the way through the Organisation for Economic Co-operation and Development report that we recently discussed in Paris.
The Labour party is out of step. We have one of the most modern, flexible labour markets in the western world, and that is one of the principal reasons why we attract 40 per cent. of all the inward investment into the European Union, and why we continue to be such an attractive place for investment to create new jobs.

Mr. Wolfson: rose—

Mr. Roger Berry: rose—

Mr. Clarke: I give way to my hon. Friend.

Mr. Wolfson: I am grateful to my right hon. and learned Friend, and I am delighted that he has emphasised the improvement in industrial relations. Does he agree that one of the things that that has achieved is that it has enabled our managers to concentrate on production and marketing, rather than on dealing with the bush fires that absorbed so much of their useful time in the past?

Mr. Clarke: I wholly agree. It was a feature of management of any major company—private or public —in this country in the 1960s and 1970s, that most of the time of the most senior management was taken up with industrial relations problems, whereas now it hardly features at that level in the crucial decision-making in most of our companies.
I agree with the hon. Member for Kingston upon Hull, West (Mr. Randall) that unemployment will be, and should be, the major preoccupation of economic policy-makers in the 1990s in the western world. However, it is a combination of sound macro-economic policy, sustained growth, low inflation and supply side policies that create flexible labour markets, improved training and education —I could address the House at length about what we have done there—and active labour market measures that keep unemployed people close to the world of employment, giving them the incentives to get into employment, giving them the support to do so, that will enable us to get ahead, and which are attracting so much international support.

Mr. Berry: rose—

Mrs. Teresa Gorman: rose—

Mr. Clarke: I think I have taken quite a long time, with apologies to my hon. Friend, Mr. Deputy Speaker.
The deregulation initiative will cut through a lot of the red tape and bureaucracy that burdens industries in this country; the private finance initiative is bringing private sector finance, management and expertise into the capital programmes of the public services; and the recently launched White Paper on competitiveness outlines several initiatives to improve the supply side of our economy.
That builds on what we have achieved since the Conservatives came to power. Since 1979, our manufacturing productivity growth has been the highest of the major European economies. We are closing the productivity gap. One recent study showed our manufacturing productivity to be greater than that in Japan. That was a National Institute report in its May "Economic Review", making comparisons on a per hour basis. A recent study by the German chamber of commerce showed that two thirds of German-owned factories in the United Kingdom achieved productivity levels at least as high as those of their


counterparts back home. That is why, as I have said, we attract so much of the global investment when it is seeking a base in the European Union.
The outlook for the British economy is continued growth and low inflation. It is the most favourable that the country has enjoyed since I first entered the House, almost 25 years ago. It is the result of the coherent economic policy that Conservative Governments have put into place over many years. Some of those policies were not popular at the time that they were introduced, but by sticking to our principles, the present Government have laid the foundations for lasting economic success. We will certainly fight to keep those foundations in place, and to ensure that they deliver the prosperity and the secure jobs that we require.
The public are still hesitant. Only for three months have they had consistent reports of good economic news. I share the public view that that must be sustained, not just for months, but for years ahead, so that sustained growth with low inflation means higher living standards, lower unemployment and more secure jobs. I believe that it is now in our gift to deliver that, and I do not believe that the Labour party has the slightest clue how to contribute to that. Its members merely watch it happen before their eyes, with no alternative policies of their own to put forward.

Mr. Gordon Brown: I beg to move, to leave out from `House' to the end of the Question, and to add instead thereof:
'notes the publication of the Government's latest economic forecast and the continuing tax rises-including the two new taxes in the autumn-and cuts in public services forcing down the living standards of millions of people; calls on the Government to reconsider the plan of raising VAT to 17.5 per cent. on fuel; notes the Governor of the Bank of England's remark that interest rates may rise, so hitting homeowners, mortgage holders and investment yet again; and condemns the appallingly high level of unemployment under this Conservative Government and the absence of a long term economic strategy for Britain—itself essential to both the achievement of long-term high growth and the reduction of inflation—which tackles under-investment in people, industry and the social and economic fabric with a new industrial training and employment policy for the country.'.
For all the Chancellor of the Exchequer's complacency and self-satisfaction—perhaps because he hopes that he will retain his job in the reshuffle while all around him others are losing theirs—the reality for millions of people throughout the country is that living standards are falling; that poverty is once again on the increase; that public services are being cut; and that tax bills are increasing.
Increased poverty is accompanying tax increases, with VAT hitting people this spring; more tax increases in the winter with the two new taxes already announced; cuts in mortgage relief and personal allowances next spring; and tax increases throughout the next year and the year after that. The problem is that the tax increases that have dominated this year and will dominate next year are not, as people would want them to be, investments to build for the future; they are simply paying off the Government mistakes of the past.
The tragedy for Britain is that, as the Chancellor had to admit when pressed on the issue of long-term interest rates and when he came to the section of his speech dealing with high levels of unemployment, all the problems that brought about the last recession are apparent now. They are lack of investment in manufacturing, which is still 13 per cent. less than in 1979; excessive dividend payments, which the

Government have yet to come up with any proposals to tackle; worsening manufacturing trade deficits, mys-teriously increased in the summer statement from £6.5 billion to £8.5 billion this year; and skill and capacity shortages throughout the economy.
For skill shortages to exist when 2.6 million people are unemployed represents a complete failure of free market dogma, and it is the ultimate failure of leadership to cut the training and employment budget when there are millions of unemployed people in need of training and thousands of companies in need of trained people. All the problems—skills shortages, lack of investment, worsening trade deficits—that brought about the last recession are already apparent even at this stage of the economic cycle, and without the Government being prepared to take action.

Mr. Tony Marlow: The hon. Gentleman set out a catalogue of what he would call reasons for the recession. What about the United Kingdom's adherence to the exchange rate mechanism? The hon. Gentleman has been criticising the free market. The ERM had very little to do with the free market.

Mr. Brown: It was the failure of the Government's economic policies that drove us out of the exchange rate mechanism. As everybody—[Interruption.] As all Conservative Members understand—indeed, the Financial Secretary to the Treasury made a speech about it—the stop-go economics that were pursued by the Conservative Government throughout the 1980s are responsible for the fact that, every time the British economy grows, we run into problems of bringing in imports, pressures on inflation and pressures on interest rates, and we are incapable of achieving sufficient growth to keep unemployment down and improve our public services.

Mr. Jenkin: rose—

Mr. Budgen: rose—

Mr. Brown: I give way to the hon. Member for Colchester, North (Mr. Jenkin).

Mr. Jenkin: I am grateful to the hon. Gentleman. On the matter of long-term interest rates, what can he do to contribute to the stability in the financial markets? Will he publish an inflation target? Will he say how he will reduce Government borrowing? Will he say how he will control public expenditure? Or will he, as I suspect, say none of that, and carry on contributing to the instability with which we have to cope?

Mr. Brown: I do not see why I have to continue to listen to the hon. Member for Colchester, North. After all, he was the Member of Parliament who said to his constituency at the general election:
Ten good reasons to vote Conservative: Low taxes".
That is what the hon. Gentleman said. [Interruption.]

Mr. Jenkin: rose—

Mr. Budgen: rose—

Mr. Brown: The hon. Member for Colchester, North is clearly not trying to catch your eye alone, Mr. Deputy Speaker; he is trying to catch the Prime Minister's eye in a succession of interventions. I may say that his chances of promotion after that intervention are rather less than they were before it.

Mr. Budgen: rose—

Mr. Geoffrey Dickens: rose—

Mr. Brown: I give way to the hon. Gentleman.

Mr. Dickens: This is quite a straightforward question to which the nation is most anxious to know the answer: does the hon. Gentleman favour an increase in the top level of taxation? Yes or no would be quite acceptable.

Mr. Brown: The hon. Gentleman is good at asking questions. In his election manifesto, he gave as the third reason for voting Conservative, "Taxes Down". Who will ever believe anything that he says again? Incidentally, in the same election manifesto, he said that whenever he stood up to speak, Members of Parliament rushed into the Chamber to hear him.
I give the hon. Gentleman the assurance that there will be a fair taxation system under a Labour Government. We will end the practice under this Government that allows millionaires to end up paying no income tax because they use the allowance system—something that even the hon. Gentleman could not defend.

Mr. Kenneth Clarke: The hon. Gentleman is replying with abuse to the perfectly sensible questions asked by my hon. Friends. He has expressed an interest in taking this country back into the ERM. It is therefore perfectly sensible of my hon. Friend the Member for Colchester, North (Mr. Jenkin) to ask him what his inflation target is. Does he have one? Is the Government's too high or too low? What is his view of public spending? Is it too high or too low? What is his view of the monetary framework? Does he agree with it or does he have a framework of his own? The hon. Gentleman cannot get away with light-weight stuff and not answer fundamental questions.

Mr. Brown: The first person to whom the right hon. and learned Gentleman should address those questions is the Chief Secretary, with whom he is in fundamental disagreement over economic policy. Should anybody believe what the Chancellor says? In his election manifesto he said:
Only the Conservatives believe in keeping taxation down. Only the Conservatives will keep the country's finances on a sound footing.
Who will believe him when this country has a £50 billion borrowing requirement?

Mr. Nigel Forman: Before the hon. Gentleman becomes too cavalier and entertaining with the truth, will he take his mind back to a point that he made at the beginning of his speech—something that he said rather hurriedly? He claimed that real personal disposable income was falling. If he had read the background document to the debate, he would know from paragraph 1.26 that in fact it is rising by 1 per cent. this year and is forecast to rise by 2.5 per cent. next year. Would he kindly get his facts right?

Mr. Brown: The fact is that the majority of taxpayers will be hit by an average £500 tax increase as a result of the Government's policies. Millions of people will find that their wages are held back and their living standards will fall because of the Chancellor's economic policy. The hon. Gentleman may think that he can deny that, but he should have listened to his constituents during the local and European elections because they said that they were not prepared to accept that.

Mr. John Butterfill: When the hon. Gentleman looks at long-term interest rates, does it ever occur to him that the closer we get to a general election, the closer seems to be the correlation between long-term interest rates and levels of support for the Labour party in the opinion polls?

Mr. Brown: I shall refresh the minds of hon. Members on what the hon. Gentleman said in his election manifesto — [Interruption.] The country deserves to be reminded of what he said at the general election, which was:
Reduced taxation gives choice and provides the vital boost our economy needs.
What is the boost to the economy from the biggest tax rises in history? Perhaps that is why no one took the hon. Gentleman seriously when he said:
Everyone knows someone who has been helped by John Butterfill.

Mr. Anthony Coombs: The hon. Gentleman is fond of quoting other people. Would he like to quote one of his own prognostications on the economy? On 17 March last year, just before the Budget, he said that he had only one Budget forecast—that unemployment would rise this month, next month and for months thereafter. Since that time, unemployment has fallen by no less than 250,000. Was his forecast just incompetence or are his economic policies divorced from reality?

Mr. Brown: I remind the hon. Gentleman that I was quoting the Government's Budget forecast of what would happen to unemployment— [Interruption.] Yes, I was. I was quoting the Budget forecast in the Red Book, which I shall be happy to quote again any time the hon. Gentleman wishes to raise the matter with me. I ask him one question: if things are so good, why do the latest unemployment figures show 73,000 fewer people in employment in the first three months of this year? Why, during the past six months, have there been more than 100,000 fewer people in the working population? Does not that make the hon. Gentleman think that he should look rather more carefully at the figures that he is given by the Government?

Several hon. Members: rose—

Mr. Brown: I shall give way just once more and then I must get on with my speech.

Mr. Rod Richards: The hon. Gentleman's policy is one of full employment. What minimum wage rate is consistent with his concept of full employment?

Mr. Brown: The hon. Gentleman cannot have studied the research done in both Europe and America. The research from America shows that a minimum wage can actually help employment prospects in the economy. A minimum wage makes firms more efficient. It means that there is less turnover of labour. Indeed, the American Labour Secretary—the Chancellor would be well advised to listen to him rather than simply suggesting that the policies pursued in America are hostile to those pursued in Britain—is considering raising the minimum wage, so confident is he about the employment prospects created by doing so.

Mr. Budgen: rose—

Mr. Brown: I am sure that hon. Members will agree that I have been generous in giving way. I have given


Conservative Members a chance to put across their wares in advance of the reshuffle. I have given them an opportunity to sell themselves to the Prime Minister. The fact that they have failed to do so is no fault of mine.

Mr. Budgen: rose—

Mr. Brown: No—[HON. MEMBERS: "Give way".] As HON. MEMBERS ARE SO INSISTENT, I SHALL GIVE WAY.

Mr. Budgen: Would the hon. Gentleman be good enough to answer one question in an untrivial way? What would an incoming Labour Government do about the ERM? Do they intend to go back into it as quickly as possible?

Mr. Brown: The difference between the Conservative party and the Labour party—

Mr. Budgen: Answer the question.

Mr. Brown: I am answering the question. Of course, it is one that the hon. Gentleman should ask the Chancellor and the Chief Secretary, who hold completely different views.
The difference between the Conservative party and ourselves is that we believe in the principle of managed exchange rates. We do not see any virtue in a free-floating exchange rate with speculative forces being left to decide the fate of the economy. As for our eventual policy on the ERM, we have always proposed necessary changes to its operation. There needs to be a far better means of dealing with the problems of speculation; a regional industrial policy throughout Europe; joining at the right rate; and a growth policy pursued by the European Community. That is completely different from the policy pursued by the Conservative Government, to the detriment of the British economy.

Mr. Ian Taylor: rose—

Mr. Brown: I am aware that many hon. Members want to speak. I have been generous in giving way, to Conservative Members.

Mr. Taylor: Give way.

Mr. Brown: Is the hon. Gentleman simply trying to interrupt my speech? I have given way, and if he was too slow in getting up to make his point, that is his own fault.
At the heart of the debate is one central truth that the Chancellor has failed to acknowledge—that Britain's growth rate throughout the 1990s will average only 1.6 per cent., which is lower than in the first 15 years of Conservative government. It will be Europe's lowest, with the exception of Turkey and Greece. We have a long-term growth rate that is just half what we achieved in the 30 years after the war.
If the test of the success of Conservative policies that the Chancellor tried to promote in his speech is to be met, there would have to be a far higher sustainable growth rate over the longer term than the right hon. and learned Gentleman's policies will produce.
I shall argue that the Government's policies are not only inefficient but unfair—that the Government are not only incompetent but unjust. They have done nothing to rectify the huge investment, technology and skills gaps in our capacity, which caused the last recession and will undoubtedly cause the next. They are the Government of unfairness and injustice.
Not only is the gap between those at the top and those at the bottom growing substantially, and faster, than at any time this century; not only have the bottom 10 per cent. in our country seen, according to the Government's own statistics, a fall in their living standards; not only are 4 million children in our country, according to figures issued last week, condemned to poverty under this Government: the whole burden of sacrifice under the Government's policies is being borne by low-income and middle-income Britain—those least able to afford it.
The Government have already shamefully misled the blind, the deaf and the handicapped over the Civil Rights (Disabled Persons) Bill. The target for further savings—and I appeal to the Chancellor— should not be the poor and their housing benefit, the unemployed and their mortgage relief, or those injured or disabled at work who are to lose Government help with industrial injury benefit. It should be the tax loopholes, the anomalies, the evasions and the avoidances that the Government have tolerated over the past 15 years.
If the Chancellor wants to take a measure of his competence in economic policy, let him re-read what he said in the Budget statement only a few months ago—that the test of the credibility of his framework on economic monetary policy would be what would happen to long-term interest rates, which were at their lowest for 25 years.
Within a few weeks of his making that statement, long-term interest rates had risen by 22 per cent. They are 4 per cent. in Japan and 6 per cent. in America but 8 per cent. in Britain. If the Chancellor has decided that his credibility comes from low long-term interest rates, as he told us in the Budget, where is his credibility now that our long-term interest rates are just about the highest in Europe? The Chancellor is condemned by his own words, and he is never to be trusted begin.
Of course, credibility and consistency was never the Chancellor's strongest suit. Let us remember what he said at the election:
Great cuts in public spending on the vital services or higher rates of personal taxation, that is not necessary.
There was a cut of some 50,000 in the civil service last week; there have been tax rises, which he himself estimates are the equivalent of 7p in the pound; and despite all his promises, there have been the biggest cuts in public spending for years.
The Government promised in their election manifesto that they would increase transport spending. They are now cutting it by 24 per cent. in real terms. They promised that they would
continue to increase police numbers
and wage a war on drugs, but are freezing police numbers, axing drug strategy teams, cutting Home Office spending by £70 million a year and betraying the law-abiding citizen.
The Government said that their commitment to the environment was not to be doubted, yet they cut environmental spending by 18 per cent. They said that the railways could play a bigger part in responding to Britain's growing transport needs, yet they cut the external financing limit by 20 per cent.
Perhaps the biggest humiliation of all is the channel tunnel, which will operate from September. But the channel tunnel rail link was first announced in 1987, reannounced in 1989 and repromised in 1991. While the French now have their rail link open, ours has not even begun. It is not even at the planning stage. It is not even a


route. There is not even the legislation to make it happen. The best chance that we have of completing it is not this century but the next, in 2003.
As President Mitterrand said, the channel tunnel opens up two worlds of travel: high-speed rail from Paris to Calais at 200 mph, then a chance to have a leisurely look at the English countryside. Now we know what the Prime Minister means when he talks about a multi-speed and multi-track Europe—not the wrong kind of leaves on the track, but the wrong kind of Government in office. That is the problem.

Sir Anthony Grant: rose—

Mr. Brown: I am not giving way any more.
What does the Prime Minister say to all that? I happened to hear from journalists what he was telling the 1922 Committee at its usual rallying meeting for the summer. It was a speech that even had the hon. Member for Luton, North (Mr. Carlisle), the potential rival in a leadership contest, saying that it merited a stay of execution. There is no question—for the moment at least —of the Prime Minister having to close the stable door after the stalking horse has bolted, because the stalking horse is in the stable for now. But it might still get angry and break the door down.
What did the Prime Minister say in a few trenchant phrases, each one characteristically hitting the nail firmly on the thumb? He said that much of the past two years have been memorable for the wrong reasons. He said:
We have missed a few tricks in recent months and years. Our message has been too diffuse. We need to concentrate better.
Missed a few tricks," he said: Iraqi guns, Pergau dam, Asil Nadir, BCCI, tax rises, the Civil Rights (Disabled Persons) Bill, Post Office privatisation, "back to basics",
black Wednesday, the small matter of a few parliamentary questions. Or is he thinking of other disasters that have not yet come to light? I think that
Our message has been too diffuse
is a euphemism for virtual civil war in the Conservative party. I think that
We need to concentrate better
is probably a reference to fewer consultancies, no more inscribed gold watches, more time in research—less time with one's researchers—tabling more parliamentary questions, but only for constituents, and free at the point of delivery.
As the Prime Minister said, the message needs to be repeated and repeated so that when people hear the word "Conservative" they know what his party stands for and why. I have a message for the Prime Minister. The message has got across. The country knows only too well what Conservatives stand for, they know why, and they know what they want to do with them.
So what does the Prime Minister do now? Is there to be a shift in policy after the disasters of their European campaign, which started badly then fell away? Not a change in direction; heavens no! That would involve a choice of direction on the part of the Prime Minister. What we have is the ritual annual reshuffle, where the choice of talent is so limited that even the Secretary of State for the Environment looks secure and passes, in these sorry times, for a safe pair of hands.
It is a reshuffle in which not even the President of the Board of Trade, only Lord Archer, wants to be Conservative party chairman—in which nobody wants the only man who wants the job that nobody wants. I feel sorry for Lord Archer. He is the victim of a new and strange discrimination, for when has the talent for fiction and the knowledge of the wilder shores of finance ever been a disqualification for the post of Conservative party chairman? It is a reshuffle that brings the Chancellor a huge dilemma, which he must be turning over in his mind as he sits next to the Chief Secretary to the Treasury.

Mr. Kenneth Clarke: rose—

Mr. Brown: I shall wait. I have a question for the Chancellor at the end.
What is the consequence of the Chancellor driving the last monetarist out of the Treasury temple? Would he prefer to see him as a departmental head, in a stronger position, ready to take him on for the eventual succession? Or would he rather keep him where he is, to keep an eye on him and what he is doing? The Chief Secretary—the last standard bearer of the new right inside the Treasury; the ghost of monetarism past; the still, small voice of Thatcherism; the insistent, insidious, whispering voice of the new right's agenda, for ever one pace behind the Chancellor wherever he goes, hissing his own message behind his back. Would the Chancellor prefer him inside the Treasury hissing out, or outside the Treasury hissing in?
The Government can change Ministers, the Cabinet, the Conservative party chairman, the presentation, the front men and the ad men, but those changes will add up to nothing, because the Prime Minister is incapable of giving this country the change of direction and strategy that it needs.

Mr. Kenneth Clarke: The debate began with the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) suggesting that we should have two days of economic debate, because we had not discussed the economy since November. The hon. Member for Dunfermline, East (Mr. Brown) went through the motions of pretending that he had been champing at the bit to talk about the British economy since Christmas. He spent 10 minutes not talking about the subject at all. Our monetary policy is clear. Can we take it that he has confirmed this afternoon that he has no views on the British economy, no economic policy, and no interest in debating the subject at all?

Hon. Members: Answer.

Mr. Brown: I will give hon. Members an answer. What this country needs is a long-term strategy for the renewal and rebuilding of the economy. That strategy involves rebuilding the capacity of the British economy. That demands four things.

Lady Olga Maitland: How?

Mr. Brown: The hon. Lady asks how. I am about to tell her. The first of the four is investment in people and employment opportunity. That is why Conservative Members should accept Labour's proposal for a university for industry as one of a number of measures for the training revolution. Secondly, the strategy involves solving the long-term problem of investment in industry. The Chancellor himself cannot be happy with a situation in


which, as he had to report in the spring statement, there are few signs of investment in business picking up in the way that it should.
We must consider three measures to solve the problem of business investment. The first is action to reduce the cost of capital for small businesses. The second is to set up a regional development agency that will work with the banks and financial institutions in helping medium-sized businesses. The third is long-term investment agreements that will enable financial institutions and industrial companies to make decisions on a long-term basis instead of being forced to respond to the short-term speculative needs of the City.
The third thing—

Mr. John Sykes: Will the hon. Gentleman give way?

Mr. Richard Ottaway: Will the hon. Gentleman give way?

Mr. Brown: Conservative Members ask me to set out the guidelines of the policy and then try to interrupt. They do not like what they are hearing because it is what they should have done long ago.
The third thing that the strategy involves is solving the problems of low investment in our social and economic fabric, as instanced by the failure not only to build the channel tunnel rail link but to deal with the problems of the London underground and the train system up and down the country. That is why our task force for private-public partnership takes the issue far beyond what any Treasury Minister is prepared to contemplate.
Lastly, we need action in Europe as a whole to keep interest rates down and co-ordinate measures for growth and investment. Our economic agenda for Britain, unlike the Government's, is an agenda for fairness and opportunity for millions of people. Our fairness agenda is about employment opportunity. It is about an emergency employment programme to get people back to work and end the self-satisfied complacency of a Chancellor who talks about action and then refuses to take the action that is necessary. It is about increasing people's earning power by giving them the skills to enable them to get the best job that they are capable of doing.
Our fairness agenda is about rebuilding the welfare state so that people have the financial independence that is necessary, particularly to women, who can be given the opportunity to work if they are provided with child care. It is about tackling vested interests—entrenched private interests in our community such as banks, financial institutions and the privatised utilities, which often overcharge people for excess profits that cannot be justified. It is about a system of progressive taxation. It is about opportunity for millions that the Government have had 15 years to offer and have failed to give the people of Britain.
When we come to this debate in the House, it is right that we should put the Government on trial. The question that people are asking throughout the country is why the Government have failed in their election promises—why they have failed to offer the prosperity that they promised would come the day after the election was over.
I shall deal now with the specific matter of Conservative policy on the future of taxation. What is the Chancellor's policy for tax cutting, as he calls it? The average family is paying £500 more in taxes—the biggest tax rise in history.

After all the evidence of tax rises, does the Chancellor admit that he misled and betrayed people? Does he apologise? Does he confess the mistakes he made? Will he try to do better?
No longer able to say that they are cutting tax; no longer even promising to cut tax and with no record in achieving cuts in tax—taxation is higher now than it was when Labour left office—with no specific Budget proposals to cut tax; and with the Chancellor unable even to repeat the promise that he used to make that the Conservative party was a low-tax party in the medium term, what do the Conservatives say now? All they can say is that they have an instinct for low taxes.

Mr. Kenneth Clarke: The hon. Gentleman asked me a question. He quoted me saying things at the election that were remarkably similar to what I said in my speech today. Of course we will cut taxation, but the key is to get public spending and borrowing under control. The hon. Gentleman shows no sign that he recognises that. Which taxes would he cut? What would he spend while he was cutting taxes? He comes out with a lot of waffle that might have beaten the hon. Member for Sedgefield (Mr. Blair) in the leadership contest but would not beat anyone else in terms of content of economic policies.

Mr. Brown: The Chancellor is now trying to rewrite history. He tries to give the impression that he went to the electorate saying that taxes would go up and then he might bring them down. He actually said:
Only the Conservatives believe in keeping taxation down. Only the Conservatives will keep the country's finances on a sound footing.
What happened after that? We had the highest public sector borrowing requirement in Britain's history. The Chancellor knows very well that he should apologise to the electorate, admit the mistakes that he made and say that the Government will try to do better. The Chancellor cannot say those things, because he is personally committed to raising VAT.
I have always wondered about the Chancellor's vote in favour of VAT on children's clothes. I have always wondered about the Walden interview in which he said that it would have been far better to put VAT at 17.5 per cent. on fuel in the first year rather than waiting and imposing it at 8 per cent. in the first year. I have always wondered about that strange by-election statement a few months ago in which he said that not to impose VAT on food and fuel was anomalous. Now I know why.
Last summer one of the Chancellor's constituents wrote to him to ask his views on VAT on fuel. The constituent has kindly sent me the letter. In the long letter—the Chancellor tends to elaborate where it is sometimes unnecessary or inadvisable—he said:
I have always thought that we exempt too many goods and services from VAT in this country… VAT is still imposed on little over half of all sales, which is much more restrictive than the sales tax in most other countries.
No wonder the Chancellor does not sound convincing when he talks about taxation. No wonder the Chancellor's instincts are regarded with suspicion. He does not want to lower taxation. He wants to extend VAT. The issue from now to the next election is whether he will honour or disown his stated commitment to the principle of extending VAT. I think that he will have an uncomfortable few months with the electorate in the run-up to the election.

Mr. Kenneth Clarke: In all the hours of research carried out by Labour headquarters, no one has ever found a quotation from me which is inconsistent with what I have been saying about VAT for years. I repeat that the Conservative party is the only party that believes in low taxation. We believe in achieving it by controlling public spending.
As the hon. Gentleman is making his speech, will he say what are his policies on taxation? If he would reduce taxation, which taxes would he reduce? What are his views on public spending? What are his views on the public spending targets that we have set? It is utterly pathetic to come out with constituency letters in which I merely state my long-stated and well-known view that, if we were starting again, we might have a lower rate of VAT and fewer exemptions. As he knows, that is not policy now. Does the hon. Gentleman have any policy at all on anything of current concern?

Mr. Brown: The Chancellor has made it clear that he is in favour of fewer exemptions on VAT. Will he now confirm for the benefit of the House that he is in favour in principle of extending VAT? Is it to food? Is it to transport? Is it to children's clothes? Is it to books and newspapers? This is a serious question. Is he in favour of extending VAT to those items?

Mr. Kenneth Clarke: The hon. Gentleman could find countless occasions on which I have said, as I have probably said ever since that vote 20 years ago which he always cites, that other countries have lower rates of VAT and fewer exemptions. The hon. Gentleman knows that that is not to be taken as a statement of policy intention now. Will he please stop flannelling around in this Blair-like fashion and tell us his views on tax, public spending, borrowing, monetary policy or anything that has anything to do with the debate this afternoon?

Mr. Brown: The Chancellor of the Exchequer has created the context for many debates that we shall have during the next election campaign. He cannot tell us that he is against the principle of extending VAT to food, to children's clothes, to books and newspapers or to public transport. The record will show that he told the House that he believed that there were far too few exemptions in this country. If that is the case, the Chancellor will live to regret what he wrote to his constituent and what he has said this afternoon.
Ministers have recently discovered instincts not only for what they call low taxation, but, if the Chancellor's speech of last week is to be believed, for community, for social cohesion and for full employment. We are asked by the Secretary of State for Employment to believe that the Conservative party, which for 15 years has never had less than 1.5 million people unemployed, and under which 1 million young people are unemployed today, is somehow the party of full employment. Having told us for 15 years that Government could do nothing to affect the employment level in this country, the Conservative party now asks us to believe after 15 days that it is somehow the party of full employment. Having told us for 15 years that there is no such thing as society, it now asks to us believe that it is the party of social cohesion and community.
Even though there is evidence, which we heard about earlier this afternoon, that 135,000 people are homeless under this Government; even though there is evidence to show that 13 million people are on low incomes as a result

of this Government's policies; even though all the evidence tells us that there is more poverty, worse poverty and worsening poverty, the Government refuse to do anything about it.
This is the dilemma for Conservative Members as they go away for the summer recess. They do not know whether to attack the Labour party for its support of social cohesion, community, collective action and full employment, or to attempt to occupy the territory themselves. They do not know whether to attack the Labour party for its goal of full employment, or, in the face of evidence, to try to claim it as their own.
I have some sympathy for Conservative Members. What are they to think? Do they cheer the new cry for full employment, or do they cheer the right wing when it says that full employment is not the responsibility of the Government? Do they wave their Order Papers at Ministers' appeals for community and collective action, or do they still wave their Order Papers when the right repeats that there is no such thing as society?
On Europe, do Conservative Members say, "Hear, hear" when the Chancellor supports the principle of economic and monetary union, or do they say "Hear, hear" when the Chief Secretary to the Treasury says that he opposes it? Do they applaud when the Chancellor champions a single currency, or when the Chief Secretary questions the very principle? On the welfare state, do they wave their Order Papers when the Chancellor says that he opposes more health charges and opting out of the basic state pension, or do they wave their Order Papers when the Chief Secretary says, "These are just some of the things that have got to be looked at"?
When they get to the Conservative party conference in the autumn—Conservative Members had better face up to this problem—do they rise for a standing ovation when the Chancellor says that he does not believe in the minimalist state, or do they give a standing ovation to the Chief Secretary and his No Turning Back group friends when they call for the minimalist state to be implemented? Do they get to their feet when the Chancellor says, as he has before, "I have always opposed vouchers," and when he admits that we still lag behind our competitors in education, or do they get to their feet for the Chief Secretary when his friends say that they favour vouchers and when he doubts whether so many graduates are needed?
Do they stand and cheer for some and sit on their hands for others? In the interests of party unity, does everyone receive a brief, crouching ovation, or do Conservative Members wait for instructions from the new chairman of the Conservative party, whoever may accept that job or from whatever faction he may come? Will the Prime Minister have to appoint two chairmen of the Conservative party to ensure that all factions are represented?
What about the Prime Minister in all this? His one constant desire is to appease whatever faction holds sway, presiding over a rabble of divided factions and appeasing the right. In Churchill's words, the Prime Minister is
resolved to be irresolute, adamant for drift, solid for fluidity, all powerful for impotence".
Bonar Law said on his leadership of the Conservative party that he was their leader and had to decide which faction to follow. That applies to the Prime Minister.
No amount of hypocrisy on social cohesion, full employment and community, no instincts for taxes, and no amount of papering over the cracks can save the


Conservative party from its ultimate destiny—Opposition. It is clear that the party which runs an economy with 2.5 million unemployed, which still cuts the number of people on training schemes and the training and employment budget year after year, and which then tries to pretend that it is the party of full employment, will never be seen by the electorate as anything other than the party of mass unemployment.
The party which pushed up taxes faster and higher than any other Government in history, which has imposed 20 tax rises in two years and which then tries to tell us that it is the party of competence in the running of the economy, will never again be trusted with government. The Conservative party is not only unfit to govern because of its record: it is never to be trusted because of its hypocrisy.
The party which has multiplied the number of people in poverty, which has widened the gap between rich and poor to the worst point this century, which has consigned 4 million children to poverty, which has done nothing and said nothing against the excesses that characterised the privatised board rooms in some of the affairs of the City, and which then tries to pose as the party of community and social cohesion, will be seen by the electorate for what it is: not the party of values but the party of sleaze. It can offer no direction, no strategy and no purpose to this country. It has failed, and it has compounded that failure by its hypocrisy over taxation and the community For 15 years, its failure has diminished this country and its failure to go simply prolongs the agony. To end the failure, we must soon end the Government.

Sir Cranley Onslow: That was a very noisy speech from the hon. Member for Dunfermline, East (Mr. Brown), but it told us damn all about Labour party policy. It told us a lot about the hon. Gentleman. It showed how frustrated he is not to be a participant in the leadership campaign, and it proved that we shall receive no answers from him during either the leadership or election campaigns. The hon. Gentleman is an ambitious young man. He puts me in mind of another Brown, George Brown. The hon. Gentleman's long-term economic strategy is very much an echo of George Brown's national plan and it is about as much use to the British economy.
I do not want to speak at length and I rise to draw attention to two matters that have not been covered in speeches or that are not directly covered in the motion or the amendment. The first involves the need, if the economy is to be successful, for the whole of Government to focus on all the issues that are in Britain's long-term interests. My first point is addressed as much to my right hon. and learned Friend the Secretary of State for Defence—who is not present—as to Treasury Ministers, who I hope will take note of what I say.
There can be no doubt about the importance of the defence industry to the United Kingdom economy and to the aerospace industry in particular. Since the end of the cold war, markets have become even more competitive, but the importance of the aerospace industry has not diminished. That makes it all the more important that national defence needs and national industry needs should be weighed together. It means that we should think even more carefully before committing ourselves to defence procurement programmes that run counter to long-term economic considerations.
The RAF's problem on the Hercules replacement is a case in point. The short-term argument may favour buying American. The long-term advantage must lie with a European solution. The American company Lockheed's campaign to sell its C-130Js to the RAF is not an altruistic one. Some of its advertising claims are so far-fetched that they sound almost desperate. Let us take an example from a newspaper that I am sure you study, Mr. Deputy Speaker, the Evening Standard. Last Thursday, an advertisement boasted that the
C-130J carries all military equipment required to be air transported for the British Armed Forces.
Anyone who knows what the requirements of the British armed forces are likely to be knows that that statement is a gross exaggeration.
Lockheed says that the C-130J means £7 billion in revenue for UK companies and
re-affirms UK leadership in key aerospace technologies".
One might calculate that the Hercules C-130J would bring us £7 billion if one believed that every one of the 2,100 Hercules flying all over the world would be replaced by a C-130J, but all hon. Members know that that is hardly likely to happen. As for reaffirming key technologies— a phrase that means nothing to me in English; it may mean something in American, but we are not told what— the C-130J has nothing significant in the way of air-frame innovation about it.
The House must remember that an alternative is on the horizon—the future large aircraft, or FLA, which is a European joint venture. It really would meet our defence needs in the next century and would bring great benefits to our industry and our whole economy. It is important that we should weigh that in our minds when that decision is made.
Where do the true interests of our economy lie when such a decision is made? Can defence factors alone, especially when we remember that future British operations are most likely to be as part of a joint or allied United Nations force, outweigh the country's long-term economic interests? In this case, and no doubt in others, I am sure that economic considerations must come first and that the British economy cannot remain strong, whatever the broad sweep of policy, unless such considerations are borne in mind. We cannot fight Britain's corner, and we cannot have a healthy economy, if we reduce ourselves to the status of sub-contractors to the American defence industry, at the cost of destroying our own.
My second point is about another area where urgent Government action is needed—the threat to various sectors of our industry from state aids given by other European Governments to their own inefficient and uncompetitive industries. I could cite the steel industry as a case in point, where our interests are threatened by state aids to state-owned European companies. I could cite the airline industry, where Air France is a notorious example of a bankrupt operation being propped up by the French taxpayer at the expense of competition from airlines such as ours, where private enterprise and private investment rule the day. Instead, I want to focus briefly on a different industry—the aluminium industry, which is an important feature of our economy.
The British aluminium industry faces over-supply in a fiercely competitive market, for two reasons: imports of aluminium from the Commonwealth of Independent States following the collapse of internal demand and the activities of several loss-making state-owned companies, principally


in Austria, Spain, Italy and France. All those companies have severe trading losses, coupled with an outflow of funds. AMAG—Austria Metal—recorded the country's largest-ever corporate loss on 14 July of £755 million, following what the company described as
a catastrophic loss in 1993".
The company has apparently cost the Austrian taxpayer £15 billion in the past decade. However much all of us may welcome the probable accession of Austria to the European Union, it cannot make sense that we should tolerate such state subsidy to an industry that is being run so catastrophically.
Inespal of Spain lost £158 million in 1992, and suffered similar losses in 1991. The position has since worsened. Alumix of Italy lost £220 million before extraordinary items in 1992, and 1993 is not likely to show any improvement.
The aluminium interests of Pechiney of France, which is 80 per cent. state-controlled, recorded a loss before extraordinary and finance items of £35 million in 1993. Part of the state's share is invested in the nationalised Electricité de France, which granted concessionary power rates for Pechiney's Dunkirk smelter. That is a typical example of the state aids that continue within the framework of the EU, with Brussels apparently unable do anything to prevent it. It is vital for the British economy that the Government act to ensure fair competition and an end to distorting state aids.
Our aluminium industry is entirely in the private sector. It employs an estimated 40,000 people, and has a turnover of £3 billion. It is a strong exporter. In 1992, it exported goods to the value of £608 million; in 1993, the figure was £615 million. The industry has suffered badly in the recession, losing many thousands of jobs, and this, again, is a factor that must be borne in mind by a Government who want to see a strong economy with strong industries.
I make those points not to criticise Government policy; indeed, I wholly support it. I thought that the Chancellor of the Exchequer was quite restrained in his failure to quote the Governor of the Bank of England on the state of our economy. The Governor is on record as saying that never in his professional life of 30 years has he known a time when the conditions for sustained non-inflationary growth were more favourable in the British economy. That is due to the skill and persistence with which the Chancellor and his colleagues have pursued their policies. They have my full support, and they deserve that of the House.

Mr. Tony Benn: If this debate is to be intelligible to people listening to it, or to those who might read it, it would be helpful if we tried to relate what is said here more directly to what is happening outside.
I do not believe that this is an incompetent Government. I have been in the House for 44 years. I think that the situation that confronts our people is exactly what the Government wanted. I shall come to the details of that —the applause that greets every statement, such as the Chancellor's statement and the statement on homelessness, proves it.
I do not think that they are an uncaring Government. That may surprise you, Mr. Deputy Speaker, but a Government who give such massive tax cuts to the rich

must care for somebody. Clearly, they do not care for the majority, who have been loaded down with the highest increase in tax on the poorest people. I met a ticket collector on the train last weekend—I have known him for some time—who came from Aden and who lives in a house with five children and his mother. That household paid £8,000 a year in poll tax. It was a big house with a number of adults, but that was the figure he gave.
The point that I am putting to the House is that I do not believe that the Government have an economic strategy. I think that they have a political strategy, and everything that has happened is intelligible to me if I realise what that political strategy is. How could a Government who inherited the enormous revenues of the North sea have spent every penny on unemployment? I do not know whether hon. Members ask unemployed people what they did before—ships' captains, ships' engineers, tool makers, draughtsmen—but the other day I was driven in a minicab by a doctor.
We are the only country in the world that could have used the North sea oil revenues to de-industrialise instead of to re-equip, or to have allowed our social fabric to be destroyed. I am talking about the infrastructure, the state of our public services. To close the pits, with 1,000 years of coal under our territory, was not an economic act in favour of nuclear power, which costs three and a half times as much as coal, but an act of vengeance against the trade union movement.
The sale of the Rover Group to a widow in Bavaria who owns 66 per cent. of all BMW shares is regarded as a triumph. What logic is there in saying that it is wrong for Britain to own the Rover Group but all right for a widow in Bavaria to do so? It is a political strategy.
I am trying to explain as best I can, because I have been here many years and have seen many Governments in power, that I think that the policy of the Government is to reverse the balance of wealth and power back to where it was in Victorian times. There certainly was a different breed of Conservative after the war: Winston Churchill, after all, was an old liberal. Harold Macmillan wrote a book in 1938, "The Middle Way", for which he might now be expelled from the Labour party because of its radicalism.
What happened under the surface was the creation of a new breed of Conservatives—I do not want to attach them to the name of a particular Minister— who greatly resented the growth in the strength of labour, the growth in local government and the development of democracy because they believed that it created a welfare state that threatened their wealth and power.
In fairness, when the Government were elected, they made many statements along the lines that the unions and local government were too powerful and that the welfare state was too big. The Government have been determined to break that political advance and to reverse it and they have done that by various well-known methods. First, they have legislated to make effective trade unionism virtually illegal. Legal safeguards for trade unions in Britain are now less than those provided by the International Labour Organisation.
Trade unions cannot defend their members. They are forced to hold ballots before they take industrial action. However, there is no ballot in respect of capital. If the foreign owner of a British company wishes to close a factory for ever, he does not have to ballot anyone. If a trade union wishes to defend the wages and conditions in


a factory by way of industrial action for a single day, it must hold a ballot. The Government's action was deliberate.
Local authorities have been virtually destroyed. In addition to the terrible sight across the river of county hall with a Japanese flag flying over it and a sign saying, "Removal", the destruction of local government has been a conscious policy because local government had been a means by which people could band together to buy collectively what they could not afford individually in terms of housing, health and so on.
Unemployment is the Government's major policy. Unemployment is deliberate. That is why I did not say at the beginning of my remarks that the Government are incompetent. They know exactly what they are doing. Unemployment performs essential functions in a capitalist society.

Mr. Julian Brazier: Will the right hon. Gentleman give way?

Mr. Benn: I will give way in a moment after I have finished my point. I hope that we will not have a lot of knockabout.
Unemployment undermines the trade unions and it lowers wages. If one goes to an employer and says, "I can't live on that money," he will say, "Well, there are 2 million or 3 million people who will take your wage." There are people on disgracefully low wages in Britain today. People with no trade union protection are earning less than £2 an hour. Such wages are advertised.
Because unemployment lowers wages, it boosts profits. It also performs the very valuable function, from the point of view of the Chancellor of the Exchequer, of limiting imports. We do not see an unemployed person in a Honda car, with a camcorder, on his way to a holiday in Spain. Unemployment is a weapon.
Reference is made to days lost as a result of industrial disputes. I wonder whether the Chancellor has ever asked his economists to add up the number of days lost in industrial disputes and to compare it with days lost through unemployment. Every day we lose 3 million days through unemployment. Unemployment is a Government policy.
Homelessness is also a Government policy. Whenever one sees someone in a cardboard box, that is a warning: "Don't quarrel with your employer because if you do, and he sacks you, you will be dispossessed and made homeless as well." I listened to the statement about homelessness that was made earlier today. The homeless, like the beggars, are now the victims of that policy. Homelessness is the warning: "Don't cause trouble." When the Government say that they want to encourage home owners, they really mean home buyers. There is an enormous difference between a home buyer with a mortgage and a home owner who does not have one.
The dependency culture—which is a phrase that should be redefined—to which the Government are committed means that one is absolutely dependent on one's employer, and has to take the wages, conditions and short-term contracts that he offers because if one does not, one is likely to lose one's job and mortgage and be thrown out onto the street.

Mr. Brazier: Will the right hon. Gentleman give way now?

Mr. Benn: I will give way quickly, but I am making a serious point.

Mr. Brazier: I am most grateful to the right hon. Gentleman. He said that unemployment fulfils certain purposes in a capitalist society and he went on to give some examples. What role does 23 per cent. unemployment fulfil in socialist Spain?

Mr. Benn: I am addressing the situation here. Felipe Gonzalez is not someone with whom I find myself in very close ideological contact. The hon. Gentleman should address himself to the Chief Secretary to the Treasury because Felipe Gonzalez follows the Chief Secretary's policies and was properly rejected by the Spanish electorate.
I hope that the House will listen to me. My point is that legislation, unemployment, homelessness and the erosion of democracy are Government policies. All the quangos that have been set up are designed to replace elected people. We heard much talk about giving the unions back to their members, but by God, when it came to the real centres of power, power was handed over to the quangos. To coin a phrase, Maastricht is the last quango in Paris. It is the last quango in Brussels. Maastricht is a huge unaccountable body with enormous power over us.
As I have said, I have been paid to watch the Conservative party for 44 years. I know what it is up to. What amazes me is why the rest of the people accept a policy that is so manifestly unfair and damaging to them and to the country. The answer is that the policy was put across with considerable skill, using language which misled people about what it was.
For example, we were told that the Government would reduce state power. I have never known a state so powerful as ours is now: there were some 10,000 policemen at Wapping, police were used in the miners' dispute, the police are controlling everyone, and huge MI5 and MI6 buildings are being constructed and used. State power has simply been transferred from attempting to protect the public against exploitation to protecting the people who support the Government against any challenge to their power.
I have referred to the word "customer" in the House on several occasions. To be a customer, one must have money. If one has no money, one cannot be a customer. The people in cardboard boxes are not customers. They desperately need houses, but they do not have the money to turn their need into a demand. Therefore, a word has been devised and injected into the citizens charter, which is all about depersonalising and dehumanising a huge and growing section of society—those who are so poor that they cannot get what they need.
I am afraid that the result of all that—this is where the politics comes into it—has been to widen the group of people who have totally rejected the philosophy of the 1980s. One could make the miners out to be unpopular if one had the Daily Mail or the Daily Express on one's side. One could attack the print workers. However, the Government have now turned on the public servants.
The Chancellor of the Exchequer is making a great mistake if he thinks that civil servants and local government workers believe that market testing has anything to do with efficiency. Not only has a huge layer of bureaucracy been set up to carry out that artificial market testing, but if better value for money is achieved, it is on


the basis of lower wages and poorer conditions for those performing the services, and rocketing incomes for the managers who favour privatisation because that is how they double, treble and quadruple their incomes.
We should not underestimate what the Government have done to the prison service. I went across to Westminster Central hall the other day with my hon. Friend the Member for Bolsover (Mr. Skinner), who received a standing ovation from the prison officers. He asked me afterwards what he had said wrong. I told him, "You said nothing wrong, Dennis. You spoke of the prisons as a public service."
We should not think that the police are not concerned. When I was at the Durham miners' gala 10 days ago, a sergeant said to me, "Mr. Benn, 10 years ago I thought you were dangerous. Now I agree with everything you say." The police are also being attacked. I welcome them on the picket line now because I say, "Next year it'll be Group 4 Security and you will be on our side." The police know that that is the case.
I believe that there is a widespread rejection of the Government's policy. Although we tend to speak in the House in economic debates in the jargon of economics, most people know what it is all about. It is about the return to Victorian conditions when the country was run by a handful of wealthy and powerful people and the rest of the people were on the floor.

Mr. Wolfson: Will the right hon. Gentleman give way?

Mr. Benn: No, I will not give way. I am making a point. I hope that hon. Members will listen because I want to keep within the 10-minute limit, although we have not yet reached 7 pm.
The answer to all this is repression. The Government introduced the Criminal Justice and Public Order Bill because they know that they are sitting on an explosive situation. Therefore, the police are to be used to prevent matters from getting out of control.
As to the economy, the Chancellor controls nothing. In respect of my hon. Friend the Member for Dunfermline, East (Mr. Brown), who I hope will soon succeed the Chancellor, the Chancellor made much of the point that the economy is controlled by international capital. That is the way it was intended that it should be controlled. Capital has been wholly liberated to move where it likes, and labour and Parliament have been restricted.
I do not want to reopen the argument about the ERM, which I voted against when the Labour national executive met before the last election. Nor I do not want to raise the question of the central bank. However, if there is a central bank—my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) has often pointed this out—a future Chancellor will have no power. Indeed, at the moment, if sterling drops three decimal points, the Secretary of State for Health pops up and closes three hospitals and confidence is restored.
It is a facade to pretend that the Chancellor is running the economy. The Chancellor is responding to forces that he has helped to liberate because he himself does not really believe that an elected Chancellor should have any control over the world economy. We can add to that GATT and the World Trade Organisation, a wholly undemocratic body accountable to nobody, which will have the power to force

nations which sign GATT to abandon certain environmental protections and other matters because they interfere with free trade. GATT and the central bank are part of that mechanism, and little scope for action is left.
I hope and believe that, with the new Leader of the Labour party, whoever he or she might be, on Thursday, and with the new Government after the next election, we shall adopt totally different objectives. Governments should be judged by their objectives and not by their techniques, playing a game that they do not control. Everybody in Britain should have useful work available at a living wage throughout their lives. That should be an objective of policy.
When I was 17, the then Government had a marvellous employment policy. When one was 17, one received a very nice letter from the Government, saying, "Will you turn up on your birthday? You will receive free clothes, free accommodation, free food and free training. All that you have to do is to kill Germans." They had a lovely youth training scheme in Germany, too. The Germans were asked, "Will you join the German army? You will receive free accommodation, free food, free clothes and free training if you will kill the British."
If we can do that in wartime for destructive purposes, nobody will persuade me that we cannot have full employment in peacetime, to build the infrastructure, to clean the rivers, to print schoolbooks, to reduce the size of classes and so on—of course we can, but it is not profitable to do it, and that is why it is not done.
People are entitled to a home. Why should there be a rat race between the really homeless and the temporarily homeless for a little bit of housing? We should build houses—there are 500,000 building workers. What I have discovered is that it is so long since the case for socialism was made that people have forgotten the argument against it. When I say, "There are 500,000 building workers, so why do we not use them?" people say, "What a marvellous idea. What is the reason? There must be some reason." Of course they have forgotten the reason because that case has not been put, but, if it is put, it will have enormous political support.
People are entitled to lifelong education. I am for raising the school leaving age to 95—I always have been. When I first spoke in favour of raising the school leaving age to 90, I had a letter from a pensioner from Liverpool who said, "I have just received an Open university degree at 92. Tony, will you raise the school leaving age?" Education should be alongside one throughout one's life. One goes into education just as one goes into a library to learn what one wants, when one wants, and comes out when one has learned it. That is education, not stuffing people like turkeys to get into selective schools to obtain better jobs.
People are entitled to health care that is free at the point of use. We have never had a free health service. Aneurin Bevan did not introduce a free health service. He introduced a health service that was free when one needed it and which one paid for when one was well. For those who are doubtful about socialism, it was the most socialist and most popular thing we ever did, and we had the resources to do it.
People should have dignity when they retire. I say "dignity" rather than "a quiet life" because many old people have much to offer. We should spend less on the means of war and more on the means of life. Hon. Members do not comment that the Japanese and Germans are so strong because they make civil goods. We can sell


a few missiles to a sheikh, while the Germans and Japanese pour out civil production, but we have to plan if we are to do that, just as at the end of world war 2 Beaufighters stopped coming out of the Bristol Aircraft Corporation in Bristol, and about six weeks later prefabricated houses started to be built. That had to be planned; it did not happen as a result of market forces. I am in favour of an incoming Government committing themselves to such matters.
Do not tell us that public expenditure is evil, because we dealt with unemployment by public expenditure before the war. We took people off the dole and put them into factories producing tanks, guns and ships. They did not receive dole money: they received wages, and they paid tax and paid for the war. There were no market forces. My granny never bought a Spitfire. I never saw a tank in the back garden. My auntie never had a sten gun. The Government bought those things. If we can do that for defence, we can do it for civil and manufacturing reconstruction.
The one absolutely basic national interest in this country is that one should be able to earn a living—that applies to farmers but not to manufacturing industry—and pay fair taxation. I do not know why people are so worried about our tax argument; I mentioned it in an intervention on the Chancellor.
There are only two questions about taxation: what is it for and who pays? If the Government tax a pensioner VAT on fuel, even on his standing charge, and use it for a Trident, that is mad. I go around Chesterfield, where a family of four pays £32 a week on weapons before they have paid the rent. I ask, "Aren't you spending a bit too much on weapons?" They say, "No, we're not." I say, "Oh yes, here is your share." Do they feel more threatened by vandalism due to unemployed lads on their housing estates or by a nuclear attack by Kim I1 Sung's son in North Korea?
The balance is absolutely wrong. If we put forward the argument with credibility and conviction, there will be enormous support for it, and I hope that it is noticed where the voices are louder than mine. If we are to do that, we must have more democracy and we must seek the powers to do so.
I do not know how the next Labour Government will cope with the Brussels Commission. However, I do know that my right hon. Friend for Islwyn (Mr. Kinnock), who I gather has moved to an office of profit in the Commission —whether it involves his immediate resignation is a matter for the Clerks, not for me—will tell us that we cannot take action to deal with those matters because that would involve interfering with market forces. That is what Maastricht is all about.
Therefore, when we present the argument—I shall have to do so in Chesterfield, if I am reselected, which I hope I am—there must be an element of truth about it. We can talk about objectives, but, as old Clem Attlee used to say, and it was in our 1945 manifesto, the test is not one's aspirations but rather whether one has a workmanlike plan for dealing with the matter.
A workmanlike plan for dealing with unemployment, which would be the greatest thing that we could do for this country, for men and women and for old and young, would involve intervening in the economy to prevent our future being handed over to the speculators and the gamblers who now control it. The people listening to the debate might be

more interested to hear that issue discussed, rather than to hear the exchange of quotations, of which many are to be found in Hansard.
It will be terribly difficult to return to full employment in a technological age. We shall not do it by raising the school leaving age, and we shall certainly not do it by raising the retirement age for women by five years. We must have, perhaps, a shorter working week and we must make all sorts of changes, but people want to know how it will be done, because their vote and support will be determined by that rather than by the false idea that somehow in this House we can so manipulate the world economy as to create the conditions that we want.
We live under the control of international capital and, until that is in some way discussed, challenged and altered, our discussions may be no more relevant than municipal discussions when a council is faced with a standard spending assessment imposed by the Department of the Environment.

Sir Terence Higgins: It is always a pleasure to hear the right hon. Member for Chesterfield (Mr. Benn). If time allows, I should like to answer many of his points, but there is one matter about which I am deeply concerned, so I shall concentrate my remarks on that.
I greatly enjoyed the speech of my right hon. and learned Friend the Chancellor of the Exchequer, not least because the summer forecast contains much good news and provides a firm basis for further progress. However, I am bound to say that my enjoyment was tinged by the old adage, "Absence makes the heart grow fonder." I think that I am right in saying that my right hon. and learned Friend has not spoken in a debate in the House since 9 December. I cannot, in only 30 years—not 40 years, like the right hon. Member for Chesterfield—remember an occasion when a Chancellor has gone so long without addressing the House. He has made many speeches outside, but he has not made a single speech in the House since then.
As my right hon. and learned Friend the Chancellor rightly pointed out, we have had an enormous number of Supply days, none of which was devoted to the economy. Perhaps that is understandable, given the satisfactory general management of the economy that forms the background to today's debate; nevertheless, it is extraordinary that there has been no Opposition day debate on the economy for such a long time. lb/>
My right hon. and learned Friend suggested that the shadow Chancellor was not anxious to debate such matters. I had the impression that perhaps it was only every six months that he managed to cook up enough jokes to conceal the fact that he was not going to give any answers to questions about the Opposition's real policy on central issues of economic management—although, of course, we hear plenty of talk about peripheral matters.

Mr. Alan Milburn: What about VAT?

Sir Terence Higgins: As I was responsible for the original zero-rating of fuel, let me say a word about that. In practice, the taxing of fuel has proved to be an appalling socialist measure: we are now taxing the entire country's fuel, and redistributing almost half the money to the lowest paid and pensioners. I am surprised that Opposition Members have not cottoned on to that.
What worries me is this. We have not heard from my right hon. and learned Friend the Chancellor in more than six months because we now have a so-called unified Budget. The question was debated for many years—for instance, by the Armstrong committee back in 1978, and by the Procedure Committee which I chaired in 1983. All were certain of one thing: if a unified Budget was to be introduced, the procedural aspects would have to be examined very carefully.
Before the last general election, a White Paper was finally produced. Its publication, however, was overlooked because of the election itself. The next thing we knew was my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont) telling us, in his 1993 Budget speech, that there would be a unified Budget in the autumn.
I feel bound to say that, in procedural terms, the move was pretty disastrous. Because the procedural aspects had not been thought out properly, we had to guillotine two Bills on the same day. The Opposition—rightly, in my view—were very concerned. The usual channels broke down, the operation of Select Committees was inhibited and the general work of the House was disrupted. We must not let that happen again this year, but it is far from clear how we are to avoid it.
In particular, as a result of that change, opportunities to debate the most important area of policy—economic policy—have been seriously eroded.

Mr. Butterfill: Will my right hon. Friend give way?

Sir Terence Higgins: No; I want to develop this point.
In recent years, the normal pattern has been for the autumn statement to take place—understandably—in the autumn, followed by debates on the White Paper just after Christmas and debates on Budget measures until this time of year. The Chancellor of the Exchequer has appeared at various points in the sequence, and on each occasion has also appeared before the Treasury Select Committee. The introduction of a unified Budget has greatly reduced the amount of time available for the House to debate such matters, which has important implications in terms of accountability.
It is astonishing that the Opposition have not kicked up a row, but it is not just a question of what they think; it is a question of the House and its future. Sooner or later—in 20 years, perhaps—we shall change sides. We may suddenly find that there are very few occasions on which to debate the economy, with which the Conservative party has always been passionately concerned.
It is doubtful whether we should return to the old arrangement, although in some respects it might be better than what we have now. We must examine the possibilities carefully. The Government have saved a good deal of parliamentary time; in a sense, today's debate is a mere sop. I believe that we should keep the detailed debates that take place on estimates days, but that we should also have more time in which to debate Select Committee reports on expenditure, because Select Committees are responsible for examining the policy, administration and expenditure of their Departments.
Since we reformed the system 12 or 15 years ago, it has been very difficult for Select Committees to examine expenditure because of the form of the estimates. Following the reform of the estimates procedures, much of

the data are now in the annual reports of the Departments: for the first time the Committees can really look at them, and for the first time the House has an opportunity to examine the expenditure of individual Departments in detail. I believe that the time that has been saved should be devoted to a number of days on which the expenditure details of the reports can be debated, on the basis of the Select Committee reports.

Mr. Butterfill: Will my right hon. Friend give way?

Sir Terence Higgins: No. I am about to make a point that is related to what I have just said, and I do not want to interrupt the flow of my argument.
Ithough we are told that we have a unified Budget, in fact it is no such thing. In the autumn statement and Budget debates, we have always discussed both sides of the equation—public expenditure and taxation—and there has never been a problem. Now the two have been brought together. Last year, the amount of public expenditure detail that was presented at the time of the autumn Budget was not very great, and I doubt whether it will be this year either.
The unified Budget means that we now have far less time in which to debate public expenditure. We have lost the White Paper debates, which, although they were never very satisfactory, at least gave us some time in which to discuss that subject. We do not have a truly unified Budget, in the sense that a proposed increase or cut in public expenditure is balanced against a proposed increase or cut in taxation. The House, of course, is inhibited from proposing increases in either tax or expenditure—that is reserved for the Government—but, in a unified Budget, a trade-off between the two would be necessary.
It is also true, however, that there is no real unified Budget within Government. I suspect that the Secretary of State for Health, for example, does not go along to the Chancellor and say, "I must spend another £2 billion on the health service; please put 2p on income tax." It does not work in that way. As we know, there is an expenditure round which is debated bilaterally; it may be dealt with by a Committee, and, if the matter is in dispute, it may go to the Cabinet. The Chancellor then decides what to do about taxation.
I believe that it is very dangerous to take such action without considering the procedural aspects. I suggest that the estimates days should be retained for more expenditure debates, and that more of the time that has been saved should be devoted to debating Select Committee reports more generally.
One of the Chancellor's remarks gave me considerable cause for concern. He said that the policy of countries across Europe, and his own policy in particular, was to cut the deficits incurred during the recession; he implied that the right approach was to increase taxation, against the present level of unemployment. I think that that is rather a dangerous concept. We still do not know the extent to which our deficit is cyclical and the extent to which it is structural; but, unless the Chancellor was implying that there has been a huge increase in the structural deficit which he needs to cover by increasing taxation, I am very doubtful about his proposals. He is in danger of slowing down the recovery and affecting the balance in such matters. Even in 1995, the deficit is forecast to be about £28 billion and there will be some problems funding that.
The issues are complex and I do not have time to deal with them now. One passage in the Chancellor's speech contained a dangerous statement. It could have been an off-the-cuff remark, but if it was drafted in advance, it needs to be re-examined closely, perhaps by the Treasury Select Committee.
The introduction of the unified Budget has eroded the ability of the House to hold the Government to account and that is a dangerous state of affairs.

Mr. A. J. Beith: I share the reforming zeal of the right hon. Member for Worthing (Sir T. Higgins) and his desire to make the unified Budget what it should have been and what he intended it to be when he played his part in introducing some of the reforms. It should have been a process through which we would have more effective Budget-making, with tax and revenue reviewed together, and more accountability. That is not yet the result of the change and I very much agree with the right hon. Gentleman about that matter.
I can understand the Chancellor wanting to dwell on the good indications contained in the present economic figures, but that is no excuse for the staggering complacency of much of his speech. It was the equivalent of the Italian fans getting out the champagne bottles when the whistle blew and the score was still 0–0. In the case of the British economy, there is more than a penalty shoot-out still to come. To make matters worse, we know more than the Italians about what could go wrong in the next stage.
From experience and our knowledge of the British economy's weaknesses, we have a pretty fair understanding that the favourable signs that we have had so far will not, by themselves, see us through the next crucial stages of recovery from a very deep recession. We shall face severe pressures. It is a known fact that the United Kingdom economy has scarce capacity in transport, skills, housing and industrial investment and that those become pressure points when growth begins again.
Growth is apparently buoyant, which I welcome, and it has been less affected by the scale of the tax increases than I feared. That fact is a significant feature in the political debate—indeed, it qualifies what the right hon. Member for Worthing said concerning his fears about what would happen if the Chancellor relied too heavily on tax increases to deal with the continuing deficit next year. So far, the evidence shows that the tax increases have had less effect on growth in the economy than some of us might have expected.
Present growth is stimulated by consumption, however, and not investment, which is what many of us feared. The risk is that inflation will develop again. It is all very well to point to the statement in which the Governor of the Bank of England described the favourable features of the present economic situation. It would also be easy to point to his warnings that interest rates may have to rise if inflation starts to increase again.
The Chancellor has ratcheted taxes to an all-time high and now has the political objective of cutting them again. If growth restores public finance sufficiently to allow tax cuts, those very cuts may over-stimulate the economy. If it is prudent to cut taxes because revenues have been sufficiently boosted by growth, the Chancellor will face the

danger that the sort of stimulation that Nigel Lawson was fond of giving the economy will have precisely the same effect again and the remedy will be interest rate rises.
The more the Chancellor's Back-Bench supporters talk about the possibility of tax cuts, the more they are likely to push interest rates up in the coming months. The markets will fear that fiscal policy will not take sufficient account of inflationary dangers and that monetary policy will have to do so.
Whichever way he turns, the Chancellor is caught. If the circumstances appear to be favourable for tax cuts—disregarding for the moment what we could and should be using taxes for—he may well find that he has to protect his back with interest rate rises. The price for political talk of tax cuts may well be further pressure for increased interest rates.
The real indictment of the Conservative Government goes much further than that. They allowed the recession to be longer and deeper than it need have been. The Chancellor keeps saying that Britain is leading Europe out of recession, but that clearly implies that Britain led Europe into recession. If being the first out is a mark of some virtue, being in so early, so long and so deep is a curious virtue for the Government to proclaim. The artificial boom that preceded Britain's recession—the work of Ministers in this Government—was the reason for the depth and length of our recession and for much of the hardship that it caused.
The Government will continue to pay the price for that in many parts of the country. My hon. Friends the Members for Eastleigh (Mr. Chidgey) and for Christchurch (Mrs. Maddock), who are sitting beside me, won their seats in Parliament partly because people were so angry about the way in which the Government had mismanaged the economy.

Mr. Wolfson: The right hon. Gentleman is arguing that the recession was unnecessarily long. With hindsight, does he think that the fact that we were members of the exchange rate mechanism for so long directly contributed to the depth of the recession?

Mr. Beith: No. I accept that our membership became unsustainable for a combination of reasons, some of which were related to the way in which British economic policy had been conducted and others to pressures outside the United Kingdom. I agree with the Chancellor that the fact that we were in the ERM for that length of time was fundamental in the battle against inflation. Had we not been in the ERM, inflation would have been far worse now. As the Chancellor pointed out, other mechanisms had to be put in place fairly quickly once we left the ERM. The exchange rate mechanism is not the best way to reach a single currency and when we eventually reach one it will be by a different mechanism, but that is a subject for another debate and another day.
One reason why we were so long coming out of recession was that the Government failed to invest in a counter-cyclical way during the depths of the recession, so the weaknesses with which we are all familiar persisted. In the latest report by the World Economic Forum, Britain came last out of all 22 Organisation for Economic Co-operation and Development countries in the number of qualified engineers, in engineering sciences and in the quality of the work force, and second from last in the standard of compulsory education.
In the United Kingdom, 25 per cent. of the work force have vocational qualifications, compared with 40 per cent. in France and 63 per cent. in Germany. In 1991, 62 per cent. of 16-year-olds in Germany and 66 per cent. of 16-year-olds in France had the equivalent of a GCSE in three core subjects—mathematics, science and the national language—while only 27 per cent. had gained those qualifications in England. We were 19th out of the 22 OECD countries in real growth in total expenditure on research and development, 20th on public funding for research and development and 22nd on private funding of non-defence research and development. We came last out of the 22 OECD countries for investment in infrastructure. Despite all that, the Government plan to chop another 10 per cent. off their capital expenditure programme for 1994–95.
During the recession years, we could have been filling some of those gaps. We could have engaged in investment that would have put people back to work, reduced the burden on the welfare benefit system, brought through income in taxes paid and shortened the agony of recession, while equipping us for the future. It will become increasingly difficult to carry out some of that investment when Government activity on physical infrastructure, for example, starts to compete with intensified private activity in the economy. In economic terms, it would have been much easier to engage in that investment then.
We are paying for the lost years of recession, which have left us between 6 and 8 per cent. below trend growth. One could say that that amounts to a £50 billion bill for the years wasted in the depths of recession. Meanwhile, in a consumption-led recovery, public borrowing is financing a trade deficit—73 per cent. of national income is spent on personal consumption, which is higher than during the Lawson years. That is a remarkable fact, which illustrates the way in which our economy has become geared to personal consumption and has moved away from business investment. The Government are not putting in place measures to boost investment or small businesses.

Mr. Nigel Forman: Does the right hon. Gentleman recognise that one implication of his critique of the policy during the recent recession is that, if his party had been influential in any way, it would have increased both public expenditure and public borrowing during those years over and above the levels which took place? Is that the case?

Mr. Beith: Yes, except for the last phrase. When the hon. Gentleman says "over and above the levels which took place", he ignores the effect of expenditure during a recession. One of the features of that which Keynes managed to convince people about, which no one has fundamentally denied since, is that expenditure taking place during a recession leads to economic activity and the payment of taxes; it reduces the payment of welfare benefits; and it could have increased the speed at which we got our public finances back to a sensible position.
A further criticism of the Government, in listing this indictment, is that they have at the same time forfeited our lead role in Europe to the detriment of London as a financial centre. The possibility of London being the centre for a European financial institution is destroyed by the opt-out position in which we have placed ourselves. We

now have the Government in the absurd position of being willing to accept as President of the Commission someone about whom the best that can be said is that he is a federalist, but a less competent federalist than the last federalist whom they vetoed.
If there are any challenges to the competence of the proposed President—and I make none because I do not know whether there are any—they are extraordinary grounds on which to prefer him to another candidate. That is another illustration of a Government who, for the purposes of satisfying those on their own Back Benches who are in fundamental disagreement with their views, are prepared to take steps in Europe that are damaging to Britain's economic position.
One must add that the Government's tax policies have been deeply unfair as well as dishonest. They knew before the election that there would be a £28 billion public sector deficit, and they had the full opportunity to tell the nation if they thought that the only way to deal with that was by substantial tax increases—perhaps even not quite on the scale that they eventually turned out to be. We could have given them the credit for underestimating the scale of increases required. But there were not to be any tax increases—it was tax cuts that would be on the agenda at the moment the ballot boxes closed and the Conservative Government were returned. That was dishonest.
There has also been the unfairness of the tax policies. According to the Institute of Fiscal Studies, the income of the richest 10 per cent. has increased by £30 a week as a result of tax changes in the past decade, while that of the poorest 10 per cent. has gone down £3 a week as a result of tax changes over the same decade.
It is a long charge sheet and the plea in mitigation will not get much off the sentence. The acceptable part of labour market reforms, the publishing of the minutes of the Governor's meetings with the Chancellor on monetary policy and the apparent toughness on inflation—I welcome all that, but it does not add up to much in comparison with the huge damage that has been done.
One is bound to ask, as did the Chancellor, especially this week: where would Labour take us? Are Labour Members really committed to economic stability and a fight against inflation? Will they act to encourage labour market flexibility? Will they ever get over their readiness to accept monopolies—a characteristic where I think they have too much in common with the Government—usually, in their case, in the public sector and, in the Government's case, in the private sector? The Government transfer monopolies from the public to the private sector with too great a willingness. Such questions will need to be answered in the coming weeks.
It is clear to us that certain crucial things still need to be done. We must improve our education system. We must invest in our infrastructure. We must promote research and development and small business. We must take a much tougher line on the effect of monopolies on our economy. We must take a lead in Europe. We must take wider measures than the Government have attempted to deal with long-term unemployment. We must invest in the people. They need long-term competitiveness, not another short-term boom with the inevitably deep collapse that would follow it.

Mr. John Townend: The three main economic objectives of any Conservative Government should be low inflation, sound public finance and reducing the overall burden of taxation. If any of those objectives conflict, clearly low inflation and sound public finance must take precedence over reducing taxation. The Government's record on inflation has been successful. Since 1990, inflation has reduced from 9.5 per cent. to 2.5 per cent. Looking at wage increases, factory gate prices and spare capacity, inflationary pressures are subdued.
As for public sector finances, while I would be the first to admit that the Government can be justifiably criticised for letting the Budget deficit rise so quickly and so high, they have now grasped the nettle and are courageously sticking to a policy which will broadly balance the Budget by the end of the decade. It is encouraging that recent forecasts show that the deficit is coming down more quickly. I strongly support the Government's policy of financial rectitude.
As a result of that success, the economy is growing, and unemployment is coming down. Despite the fact that long-term interest rates have risen slightly recently, the immediate prospects and, indeed, the medium prospects look favourable. But it is when we come to reducing the level of overall taxation that we see that the Government have not achieved their objectives; indeed, the opposite is the case.
Unless we are prepared to take some tough decisions, that will not be achieved in this Parliament. If we stick to the policies laid down in the Red Book, as the Chancellor said, the overall increase in the burden of taxation will be more than £16 billion in this Parliament, which is equivalent to 8p on the standard rate. To fight the next election with that scenario is not acceptable to me or to many of my colleagues on these Benches.
It is highly hypocritical of Labour Members to attack the Government for increasing taxation when, in every economic debate, they always want us to spend more. Whenever we suggest cuts in spending, they are opposed to them. They even criticised the defence review announced last week for being Treasury-led. That is hypocrisy.
We must ask ourselves how we got into that situation. In the autumn of 1992, after we were swept out of the exchange rate mechanism, it became clear that the deficit would rise by £1 billion a week, to some £50 billion in the ensuing financial year. At that time, the Government decided not to reduce spending, despite pressure from many of us on the Back-Bench finance committee suggesting that they should cut spending. At the same time, Labour was opposing any cuts in spending.
In the 1993 Budget, the Government decided that they had to deal with the deficit, but they were not yet prepared to cut spending. Once again, Labour opposed any cuts in spending, and demanded more spending. In the last Budget, I was delighted that the Government at last decided to cut spending, and we had the first reduction in my lifetime of the control totals. That was done by the strategy of not allowing Departments to spend the contingency reserve.
I welcome that start, and I congratulate the Chancellor on being the first to have the courage to grasp the nettle. However, he must be even tougher and concentrate on

fulfilling our manifesto commitments, because we have seen from Labour today what we can expect if we do not do so.
That means that we will not be able to cut taxes before the next election unless we are prepared to make substantial cuts in public expenditure. At least an additional £5 billion should be cut from the existing control totals this year, and another £10 billion next year, so that we are in position and have the window of opportunity to bring taxes down at least to the overall level that they were at the 1992 election.
Naturally, Labour Members ask where we should make the savings. If they sit back for the next few minutes, I shall tell them. First, we should reduce the Government's overheads. Wherever one looks in the public sector, whether it is at Government or local level, one still sees overmanning, waste and inefficiency. Whereas the recession forced every private company, however large or small, to cut its overheads to survive, the public sector has been almost immune. The civil service White Paper introduced this week is a start, but it is too little, too late. I have a feeling that it has been watered down by the mandarins.
The scope for manpower savings is illustrated by what has happened in the nationalised industries which have been privatised. British Telecom has reduced its work force by 29 per cent., British Gas by 18 per cent. and Powergen by 35 per cent. The public sector, like the private sector, has invested a lot of money in computerisation and information technology, but it has never squeezed out the manpower savings that the private sector has done in that area.
Wherever we look, there are examples of waste. The Inland Revenue has just built a new training centre. Perhaps it needed a training centre, but did it need an indoor heated swimming pool? The NHS offices in Leeds, with their pools and fountains, are the most expensive and extravagant offices in the city, and were opened when there was a surplus of office space at knock-down prices. The British Library has already cost £450 million. Even in this building, secretaries' desks and filing cabinets will be sold at auction next week and new ones brought in.

Mr. Brian Wilson: Will the hon. Gentleman give way?

Mr. Townend: No, because many hon. Members want to speak.
The Government spends £20 billion on overheads. If they cut that by 5 per cent. for each of the next three years —that is very reasonable when compared with what has happened in the private sector—they will save £3 billion a year.
It is the same in local government. One has only to compare the cost of services per head in Islington with those in Wandsworth, or look at what my local Labour county council does, to see that there is an enormous amount of waste and overmanning. Salary costs of local government—excluding teachers and police—are £20 billion. If we cut those by 5 per cent. for three years, we will save £6 billion.
In Scotland, we are still spending far more per head of population than in England. The figure for local government grants in Scotland works out at £1,020 per person, while in England it is £691. In the NHS, £800 is spent per person in Scotland and £635 in England—26 per


cent. less. The figures for education are the same. It is not fair and not necessary, and those costs should be reduced to the English level by the next election.
Overseas aid has a budget of £2.3 billion. We all agree about giving money away when we have it, but we are in debt as a Government and as a country because of the balance of payments deficit. We could quite fairly save £0.5 billion a year for three years in that area.
There has been an explosion in legal aid. We have taken some action, but my constituents were appalled when they read that Iraqi business men have been getting more than £1 million in legal aid. We should abolish legal aid for anybody who is not a citizen of this country.
The fastest growing cause of expenditure is without doubt social security, yet there is enormous abuse and fraud. Last year, we discovered £558 million in social security abuse. Anybody who knows anything about what is happening in this country and who talks to ordinary people knows that that is just the tip of the iceberg. Greater effort must be made to reduce fraud.
In my view, too much of the social security budget is going to dishonest people who are working in the black economy, to the workshy who have elected to live off benefits instead of getting jobs, and to those who irresponsibly have children knowing that they can expect the State to house and keep them. Not enough of the budget is going to those who are really in need—the old, and particularly old-age pensioners who are just above the income support level. They cannot get housing benefit, which includes rent and repairs, because they are living in houses which their spouses have left them, and the cost of repairs is bearing down heavily on them.
I welcome the initiatives by the Secretary of State for Social Security to stop abuse as he has done in the past couple of weeks, and to close loopholes whereby foreigners coming here on holiday can claim benefit. I cannot for the life of me understand why we excluded visitors from the Republic of Ireland from that. Ireland is just as much a member of the Community as France or Germany, and I detect the malignant hand of the Foreign Office.
Many millions of pounds could be saved by contracting out and more market testing. For example, we could save about £80 million a year if we abolished the NHS stores department, except for a small unit which could do all the negotiating and buying, and left the warehousing and the handling of stock to the private sector. It is interesting that the Welsh Office is progressively doing this, and there is no reason why the rest of the country should not do the same. Just because we are talking about the health service, it does not mean that savings cannot be made, and that there is not inefficiency and overmanning.
As public sector wages are the biggest element in our costs, it is vital that we keep a firm hand on them. I urge the Government to stand firm in the dispute with the signalmen, because numerous public sector unions are looking out for what will happen.
The statement on defence last week was very heartening

Mr. Wilson: Will the hon. Gentleman give way?

Mr. Townend: I am sorry, but many hon. Members want to speak. I must get on, because I might be asked to sit down if I am not finished by 7 o'clock.
It was heartening that the Secretary of State for Defence could find so many areas of waste and overmanning that he was able to provide the Treasury with initial figure savings without cutting the front line. When I heard my right hon. and learned Friend say that it was costing £300,000 to train a musician, and that there were many other examples of savings which could be made without any detriment to the armed forces, I asked myself why the savings could not have been made before.
People such as myself have been making speeches in Budget debate after Budget debate about the bloated overmanning and waste in the public sector. I found it a little disappointing that, at a time when communism has collapsed, the Ministry of Defence made more savings than it was asked for, and then went on a little spending spree. I should have thought that, in view of the size of the Budget deficit, the whole lot should have gone back to the Treasury.
I accept that there are considerable cultural problems to overcome if the Government are to be successful in their endeavour to cut spending. By and large, senior civil servants and heads of Departments are not likely to help Ministers to cut the size of their Departments because their status in the mandarin hierarchy depends on the size of their budget and of their work force. Indeed, many Ministers have no wish to see their Departments slimmed down.
Many Ministers do not have the will to fight their civil servants, and some of them do not have the ability—not having had business experience—to force through savings and cuts in the work force against the wishes of senior civil servants who are trying to protect their bureaucratic empire.
Last year, I was lobbying Ministers to reduce spending, and I was told several times, "You have to appreciate that it is politically more difficult to cut spending than to increases taxes." Having seen the results of the local elections, the by-elections and the European elections, I hope that my right hon. and hon. Friends realise that that is not true. The Tory party is nothing if it is not the party of low taxation.
Market testing and contracting out have not been applied with the same enthusiasm throughout the public service, and that must be done. To achieve that cultural aim, we must look to the Prime Minister. In the Cabinet, only three people have no vested interest in keeping their budgets up—the Chancellor, the Chief Secretary and the Prime Minister.
I hope that my right hon. Friend realises the political danger we face on taxation, and I hope that he will launch a crusade to cut waste, inefficiency, fraud and overmanning throughout the public sector, including local government. He should receive the maximum support from Ministers. It should be made clear that those who succeed in the endeavour will be promoted, and those who do not succeed will be asked to make way for others.
It must be made clear to permanent secretaries that those who do not co-operate will not get the traditional knighthood. The Prime Minister should consider appointing a Minister in every Department whose sole job would be to improve efficiency and cut waste and spending. If the civil servants are not prepared to co-operate, those Ministers should be able to bring in accountants and company doctors from the private sector,


who have had experience of cutting overheads in this terrible recession, which industry has survived so well and so efficiently.
It is not too late for us to achieve our manifesto commitment on taxation if we act this year, but it will be too late if we wait for another 18 months.

Several hon. Members: rose—

Madam Deputy Speaker (Dame Janet Fookes): Order. Before I call the next hon. Member to speak, could I point out that between the hours of 7 and 9 there will be a limit of 10 minutes on speeches.

Mrs. Helen Liddell: I am very grateful to you, Madam Deputy Speaker, for calling me to speak in this debate, especially as it is such an important one and falls in the final week of the Session.
This has been a tragic Session, marred by the death of my predecessor, John Smith. I am extremely conscious of the eloquent tributes that have been paid to him from both sides of the House at the time of his death and at his subsequent funeral and memorial services. I, of course, remember him as a constituency Member, and the people of Monklands, East made it very plain that they saw John Smith very much as their own Member.
They were extremely conscious of the fact that they had in their midst the man who they believed was going to be the next Prime Minister. They too are conscious, as I am, of the unfinished business of John Smith, not least of which was the establishment of a Scottish Parliament within the framework of the United Kingdom, and that even more important unfinished business—the election of a Labour Government at the next general election. When that day comes, it will be our lasting tribute to John Smith.
When John Smith made his maiden speech before the House, he asked hon. Members to take into account
the diffidence which I feel in attempting to follow in the footsteps of so fine a predecessor."—[Official Report, 10 November 1970; Vol. 806, c. 243.]
I am sure that hon. Members recognise that my diffidence is even greater, as I must follow in the footsteps of someone who went on to lead my party.
Throughout the communities of Monklands, East, John Smith was respected and admired. The side of John Smith that came out so strongly after his death was the warmth, commitment and enthusiasm that he felt towards ordinary people. It is in that spirit of dedication that I wish to continue to work for the people of Monklands, East.
The parliamentary by-election that I have just come through was a bruising affair, which concentrated on one issue—the local council. That concentration offers a lesson to all of us politicians, be we in government at local or national level or elsewhere, because it demonstrated the importance of taking into account the fears and the sense of grievance of local electors. Now that the by-election is behind us, it is important to take into account the need for a time of healing within the communities of Monklands, East.
Many in the constituency felt besmirched by some of the negative publicity that attached to them. I say to the House that they are decent, honourable and hard-working people. The constituency spans a number of small communities, 12 villages, the town of Airdrie and a substantial part of Coatbridge. Those communities were the cauldron of Scotland's industrial heritage.
The men and women of those communities went to work in the textile industry, in coal mining, the iron and steel industries, shipbuilding and in motor manufacture. In the past 15 years, those industries have disappeared. Those communities, which measured themselves by the contribution they could make to the wider economy, now suffer from a lack of morale and of no longer feeling wanted.
It is incumbent upon all of us who are concerned about the future of our economy to take into account the real needs of such small communities, where there was a great emphasis on acquiring skills and education. I know that only too well, having been educated there, as was my husband. The people of those communities want their children to go out into the world with the best possible background, be it obtained in the formal educational structure or through the acquisition of skills.
One in four people in Monklands, East are out of work, and young people account for one third of them. One in five are on benefits. It is also a tragedy that, in all the statistical analysis of health and sickness in Scotland, Monklands, East breaks all the records. It is a constituency that has been visited by poverty and unemployment.
Much can be done by the House and the wider community to help encourage the regeneration of such communities—there are many like them, not just in Scotland but throughout the United Kingdom. I want to see more jobs brought to those communities, bearing in mind their strong, proud heritage. A number of small industrial sites are located within the constituency, but not too many large ones, although a number of such sites throughout north Lanarkshire would be very attractive to inward investment—not least, of course, the former steel plant at Ravenscraig.
The constituency offers a number of opportunities for the siting of small businesses. My hon. Friend the Member for Dunfermline, East (Mr. Brown) mentioned the need to encourage small businesses, and I have a particular interest in that, because I have a particular desire to see new skills and new opportunities brought to the constituency that was good enough to elect me on 30 June.
Many opportunities for small businesses in Scotland are not taken up. In the 1980s, for example, if Scotland had had the same level of business start-up as the south-east of England, where we are today, we would have created 195,000 more jobs. Even if we had imported the death rate from that decade, which was all too apparent in the south of England, Scotland would still have been 36,000 jobs ahead of the game. That is an attractive statistic to those who are concerned about attracting jobs to Scotland, and in particular to communities such as Monklands, East.
We must do more to encourage small businesses and put fewer obstacles in the way of establishing them. Many men and women who are now seeking an opportunity in their middle years, who have perhaps lost their jobs as a consequence of the recession, wish to put their skills and expertise to much greater use in the small business sector.
Other communities in other parts of the world attract such small business most effectively. The state of Massachusetts, for example, has become the hotbed of new business start-up in the United States because of the marriage between its business community and academic institutions. I would like to see that same partnership developed in the west of Scotland and throughout it.
In Bavaria, the banking system has changed banking arrangements to make the raising of capital for small


businesses that much easier. Many people who wish to start up small or medium-sized enterprises in Scotland are confronted with the traditional Scottish bank manager, who is scared of risk. Risk is endemic to small businesses. We must recognise that, before we achieve success, we may have to take into account the possibility of failure.
We cannot brook too many failures in a community that so desperately needs jobs and hope. It has so much to offer. The skilled artisans, who made sure that there was a future for people like me by offering us educational opportunities, as well as offering other opportunities to everyone, regardless of their background, are entitled to pass on to the next generations the kind of communities that they worked hard to build.
Those are the communities among which John Smith worked, and they are the communities that I dedicate myself to serve. I am very grateful to the House for its courtesy in listening to my maiden speech. I hope now to go on and continue my parliamentary career in serving the people of Monklands, East as John Smith did.

Mr. Mark Wolfson: It gives me particular personal pleasure to follow the maiden speech by the new hon, Member for Monklands, East (Mrs. Liddell). It was an impressive introduction to the House. The hon. Lady talked eloquently and movingly about the people of her community, their hopes and their aspirations. She linked what she said about their desire for new skills and new opportunities with her own experience. We know from the election that she is a bonny fighter and we wish her well in the House. I hope that we shall hear much more from her in the years to come. It is appropriate to mention that, for several years, John Smith was my pair in the House. All my contacts with him were a pleasure due to his humour, integrity and friendship and I, too, felt a sense of real loss at his tragic death.
I firmly support the motion before the House and congratulate my right hon. and learned Friend the Chancellor on his approach since taking on that difficult and important job. In his speech, he dealt in a pragmatic and sensible manner with the current position of the British economy, its outlook and forecasts on it. By comparison, the performance of the shadow Chancellor was disappointing. He told us nothing of the Labour party's policies but simply made broad generalisations. I genuinely wanted him to say how, for example, the Labour party intends to enable, encourage or command the City to take longer-term decisions about industry. I accept that that problem exists, but changing it needs a concrete approach and we heard no concrete arguments from the shadow Chancellor.
The position of the British economy today bears no relation to the picture painted in the shadow Chancellor's speech. We have achieved good results: low inflation, low interest rates and a mortgage lending rate of less than 8 per cent., which is the lowest for more than 25 years. Those achievements have a positive effect on individuals' home budgets.
I agree that there are areas of difficulty and deprivation. Much has already been said about unemployment, which is and will remain a key economic and social issue in the years ahead. In national terms, it continues to be important

and I appreciate that it can be a personal tragedy for individuals who are directly affected. I agreed with hon. Members who focused on the concerns of young unemployed people at the start of their working lives.
However, the right hon. Member for Chesterfield (Mr. Benn) pushed out some unreal proposals to deal with unemployment. He described how unemployment had been dealt with during the second world war, when we took measures to provide the armaments that the nation needed and, in doing so, ran up an enormous national debt. Thank goodness that America was there to assist us in dealing with that problem. We could not run the economy like that today and it was unrealistic to argue that we could.
The only way in which we can safeguard jobs is to ensure that we have a thoroughly competitive economy. That is why I firmly support the Government's actions to ensure that we are not burdened with the paraphernalia of the social chapter, which would only increase costs for British industry struggling to compete with the vigorous and ever-growing economies of the Pacific rim. High costs of manufacturing are now a growing problem for Europe. It is a major benefit to Britain that we have a lower-cost economy than the rest of our European partners. We need to keep it that way.
My view on the exchange rate mechanism has been changed by hindsight. I accept that there were benefits in our membership, particularly its effect on inflation. It ensured that we squeezed inflation down to levels that have not been experienced for many years. I am pleased, however, that the Government have said that they do not expect to rejoin the ERM in the foreseeable future. We should not lose the control which we now have over our economy as a result of being out of the ERM. The effect on Britain of a future ERM-type organisation, let alone a single currency, would be much more damaging in a larger Europe. I strongly support the enlargement of the European Union but it must mean that the opportunity to get all convergence criteria moving in the same direction at the same time, with the measurements necessary to achieve a single currency, is much less likely to happen.
If we decided to go for a single currency, we would endanger the unity of individual nations and put the European Union under a strain that might lead to its break up. Some of my hon. Friends might welcome that, but I would not. I want a European Union that gives us the benefit of a wide market but it must be loosely organised on the basis of a strong market rather than tying member states too closely to each others economies.
It is important that the electorate appreciates that, although the Government have embarked, quite properly, on a ever-tighter control of public spending, we have none the less continued to increase spending on social security, education and the national health service. As last week's statement spelled out, we are attacking areas of bureaucratic overspending, such as those in the back-up to the armed services. Dealing with those is long overdue.
I applaud the Government's actions in that respect and encourage members of the Treasury Front Bench to continue the line that they are following. I see and hear positive responses from many people in my constituency, which suffered heavily during the recession, that the outlook and opportunities for them are improving week by week and month by month.

Mr. Robert Sheldon: It was with a great deal of pleasure that we heard the maiden speech of my hon. Friend the Member for Monklands, East (Mrs. Liddell), who took over a seat from an hon. Member whom we held in the highest regard. The way in which he departed from us made us feel even more poignantly the loss that we suffered. The fact that we could give my hon. Friend such a clear vote of confidence in taking over from him means that we shall listen to anything that she has to say to us in future with great care and interest.
The Government have committed three disastrous errors. Many of us expect Governments to take a certain amount of time to learn the problems of government. But this Government have been in office for 15 years and still have not learnt much. The first disastrous error was on monetarism; the second was to waste North sea oil; and the third was the introduction of the poll tax, which did so much to assist the decline of local government.
We suffer from the problem that the growth of monetarism did much damage to manufacturing industry. My hon. Friend the Member for Dunfermline, East (Mr. Brown) was right repeatedly to point out the need for that type of investment.
Conservative Governments have obviously had contempt for manufacturing industry, especially Nigel Lawson, when, in a speech at the Mansion house, he scorned the valuable work done by the House of Lords Select Committee in pointing out the importance of manufacturing industries. The service industries were held to be the great wave of the future—they were going to provide the great prosperity.
However, service industries are not alternative to manufacturing industry; they are a natural consequence of manufacturing industry. One needs efficient operations to service machinery and so on, but, less obviously, the City of London owes its eminence to manufacturing industry.
What are the big financial centres of the world? They are London, New York, Tokyo and Frankfurt, and they became financial centres only as a result of their manufacturing industry. It was because Britain in the last century was a manufacturing nation that London was created as a financial centre; it is only because America became the next big industrial power that New York was created as a financial centre; and it is only because of their industries that Frankfurt and Tokyo have become financial centres.
Whoever heard of Tokyo as a financial centre before its industry, in the post-war world, became the power that it subsequently became? Whoever heard of Frankfurt before it became an industrial centre? But Frankfurt will now be the main Community centre for our financial institutions, and we are losing the battle for financial centres in a number of ways, because our manufacturing industry is unable to support them.
I strongly welcome the existence of our City of London; it is very important, but we must understand the underlying strength that comes from manufacturing industries.
As for the service industries such as health, education and transport, they rely on the wealth creation that comes from manufacturing industry. Manufacturing industry is the substratum of all those other advantages that we obtain from service industries.
That wealth creation comes from our factories—from the skills and abilities of those people who work in them.
I accept that, when jobs are needed, only some of them will be found in those factories. There will not be an enormous increase in employment opportunities as a result of the greater concentration on, and the greater understanding of the need for, manufacturing industry. I accept all that. However, the output from manufacturing industry is all-important. That output creates, not so much the jobs as the wealth, and from that output, from that wealth, we can create the service industries—we can create educational opportunities, health services and all the other facilities that we require.
Services rest on the backs of manufacturing industry. We want a sensible acknowledgment of the wealth creation possibilities. That will provide the means for us to employ many more people in the public and the private service sectors. That is the principal way that we shall get people back to work—through the service industries, by getting people to work in restoring our infrastructure and repairing the decay in our cities, in a sensible programme of reconstruction, paid for by a new, firm industrial policy.
Our recent productivity increases have resulted mainly from investment for efficiency rather than from investment for efficiency and the expansion of output. If one invests simply to obtain efficiency, one will reduce employment. One needs to invest both for efficiency, which is important, and for an expansion of output. That is why our manufacturing base has not expanded in the way that those of other countries have. We need today a new understanding of the importance to our country of manufacturing investment. That should take place in this country and in our industries.
Many years ago, in 1961, there was the bank rate investigation of a Governor of the Bank of England who had advised the sale of sterling and commented:
It may not be patriotic but it makes sense.
My hon. Friend the Member for Livingston (Mr. Cook) has commented on one aspect of patriotism today. The wish to invest in our country is an aspect of patriotism. Of course there is a need to invest overseas in certain areas, but patriotism means that we should try to improve our manufacturing processes, our manufacturing industry and our employment opportunities here in Britain. Those matters should be paramount.
We need to encourage people to invest. The Government can do something about that immediately, by increasing capital allowances. The present 25 per cent. rate for capital allowances is ludicrous. I have argued repeatedly that is not an investment incentive but with with an investment disincentive.
Everyone knows that many items of capital equipment actually depreciate by more than 25 per cent. a year. That is especially true in the first year. The profit made by the sellers of a piece of capital equipment means that it will not be worth 75 per cent. at the end of the first year—that may be the profit that is made on it. If one buys a piece of capital equipment for £1,000, there are not many cases when, if one tries to sell it, one will receive £750 for that piece of capital equipment at the end of the first year.
So we are dealing, not with an investment incentive, but an investment disincentive. That is something that the Government can change straight away.
The other great error was over North sea oil. It was a great pity. We had a wonderful opportunity. I minuted the Chancellor of the Exchequer, Denis Healey, in 1977 and told him, "If you do nothing with this money, it will just be spent on consumption. If we do something for


manufacturing industry—that is not the best way to invest, I grant that—it is better than using it to increase our consumption, which we shall not be able to maintain over a long period."
That was the case then for doing something with our North sea oil. It is a great pity. We missed the one opportunity that we had, which has now gone, because now it is part of our current basis of consumption.
Speaking of consumption, a consumption-led boom is not the way to spend our way out of recession. We want an investment-led boom, an investment-led recovery, and we should be working towards that. I do not think that the way to proceed is to try to increase the levels of consumption to bring an improvement in the economy.
The third great disaster was the poll tax. The poll tax was not just a foolish tax—of course it was—it was difficult to collect, in many cases easy to avoid, and very much more unfair than the old rating system. The specific problem that has resulted is that we have diminished the role of local government, and the position of local government is now far worse as a result of the introduction of the poll tax than ever it was.
I remember—I was only a small player in those days —that we created Manchester airport in the spirit of the old Manchester ship canal, whereby 95 per cent. of the ships of the world could come right into the heart of Manchester. If we were to be worthy successors to those people, we wanted our own airport.
That was the spirit, and we must return to that spirit. We must return to the spirit of local government—the spirit of co-operation between people in different ways. The beginning must be made with industry, and it is to that area of the economy that the Chancellor of the Exchequer must turn.

Mr. Nicholas Budgen: I join all those who have recently spoken in expressing my pleasure at the maiden speech of the hon. Member for Monklands, East (Mrs. Liddell). She spoke with fluency and passion, and I felt that she brought to us some of the adrenalin that she plainly felt during a hectic election campaign. One could think, as she spoke, of the sweat and energy as she sat up thinking what she was going to say at that difficult meeting the next day, and as she rehearsed it to herself, perhaps rehearsed it to her husband and then delivered it with passion and energy. Let us hope that she continues to grace the House with the energy and interest that she undoubtedly must have displayed in her successful and difficult by-election.
I should like to start from a slightly different point of view from that of the right hon. Member for Chesterfield (Mr. Benn). He said that the Chancellor did not control anything and that international capital controlled everything.
All Front-Bench spokesmen address the House on the basis that the Government control most things. I diffidently suggest that the Government control few things. The Government govern best when they attempt to create a known and stable framework within which the people may make their own prosperity, both for themselves and for their fellow subjects of the Queen—and, I should add, the

citizens of the European Union. It is important to decide whether the rate of growth and the general prosperity at present time are consistent with a stable framework.
One thing that my right hon. and learned Friend the Chancellor did not say about inflation was on the extent to which it inevitably distorts the economy. One of the great distortions of the boom was the housing market. We all recall that in the three years 1986, 1987 and 1988 the value of private housing rose by 20 per cent., 20 per cent. and 30 per cent. respectively. Housing was not bought for shelter or even for the display of personal goods; it was bought for speculation. People of a very young age were trying to get on to the housing ladder as quickly as possible.
As the economy adjusts to about 2 per cent. inflation from about 10 per cent. inflation, young married couples are now buying houses later in life and the rented sector has picked up satisfactorily, not just because of the reduction in inflation but because of the considerable reduction in the stranglehold of rent controls and excessive security of tenure. In addition, the housing market is having to work its way through the negative equity suffered by about 2 million home owners who bought just before the end of the boom.
The economy is now stable and sustainable—mainly, I suspect, because of the delayed advantages of having come out of the exchange rate mechanism on 16 September 1992 and because of the substantial relaxation in monetary policy that followed that.
I do not want to be too technical in this short speech, but for those who enjoy technicalities I commend a good article in the Financial Times of 5 July, which set out what is happening to sterling M0. That means cash in hand, which is now circulating at about the same rate as it was at the top of the boom in 1988. There is every sign that the retail sector is very strong. People are not borrowing to buy big items such as land or housing, but they are spending money on consumer items. One of the best signs of that can be found in that article, which details the extent to which more and more £20 notes are coming into circulation.
There is also anecdotal evidence of the strength of the retail economy—for example, the absolute explosion in car boot sales. I understand that about 1,500 car boot sales take place every week— [Interruption.] All right, it is part of the spiv economy. Hon. Members may laugh at that and say how dreadful it is, but it creates wealth and that is what the economy is about. We should note the strength of M0, the strength of the retail sector and the considerable activity in the new car market.
The hon. Member for Coventry, North-West (Mr. Robinson) nods. He knows a great deal more about the car market than any other hon. Member will ever know. I am sure that a car manufacturer is rather like a farmer, and I have never met a farmer willing to admit that he was doing well. If an hon. Member with a car manufacturing interest agrees that the industry is doing well, car manufacturers must be doing jolly well indeed. Therefore, I contend that we have the basis for sustainable growth.
Sometimes when we talk about general trends, the man or woman in the constituency says, "We don't see much of it in Wolverhampton," or Stourbridge or wherever. I draw hon. Members' attention to two recent reports on how the local economy of Wolverhampton is growing. The first is from the Wolverhampton chamber of commerce. In its quarterly economic survey, published on 11 July, its chief executive says:


I find the responses for the first half of the year especially encouraging. The Chamber has always held the view that our emergence from this very deep recession should be moderate and this clearly seems to be the pattern.
He then gives details of the way in which he notices sustained and satisfactory growth in all the areas that his chamber covered over the past half-year.
Those of us who have been in the House for some time may remember Mr. Geoff Edge, who is now the chairman of the west midlands economic bureau. In that capacity, each month he provides Members of Parliament and others in the west midlands with what he describes as a labour market briefing. Mr. Edge was a distinguished or, if not distinguished, vigorous supporter of the policies so consistently put forward by the right hon. Member for Chesterfield. Mr. Edge would not easily applaud much of the activity of a Tory Government. However, he says about the west midlands that unemployment among the under-25s has dropped greatly over the past year—

Madam Deputy Speaker: Order. The hon. Gentleman's time is up.

Dr. Jeremy Bray: It is a great pleasure to follow the maiden speech of my hon. Friend the Member for Monklands, East (Mrs. Liddell), not least to welcome her into the doughty and select company of Lanarkshire Members of Parliament. Our constituents expect a great deal from us and over the many years that we have known her, in her election campaign and, now, in her remarkable maiden speech, she has demonstrated how much she will contribute.
I am sure that the Chancellor will be pleased to hear that I agree with him that there is no reason why we cannot look forward to a long period of sustained growth with unemployment falling, low inflation and the balance of payments and public borrowing coming within sustainable limits.
On macro-economic policy, both the Government and the Opposition have now rejected the argument that one target will do. In the old days it was unemployment, then money supply, then inflation, and then the exchange rate. Now, perhaps, it is unemployment again. It used to be argued that if the one chosen target is achieved and maintained the rest will come right, or at least be accepted that they are outside the Government's influence. But successive targets have been missed and abandoned, because the measures needed to achieve them would have such damaging consequences for other aspects of the economy that they could not possibly be pursued.
All the objectives are affected by all the instruments of policy—tax, public spending and interest rates—and they must be kept in mind. It is not possible to put everything right overnight. It takes years for most of the effects of policy changes to appear. Objectives now satisfactorily achieved cannot be assumed to stay achieved.
The emerging consensus is that all the instruments of policy must be used in the balanced pursuit of all the objectives—not just inflation, unemployment, the exchange rate, the current balance or public borrowing, but all of them together, with one or two more added according to taste, and for several years ahead. I have carried out the exercise of designing such balance-achieving policies with the Treasury's own apparatus of policy optimisation on the Treasury's own model. In successive years since 1987, they were published and sent to the then Chancellor. Had

Chancellors followed those analyses, they would have avoided the major mistakes of economic policy, which, in the event, were made. No doubt similar analyses were carried out at the time in the Treasury.
This year, the same analysis of the Treasury model is more or less consistent with the Treasury's summer economic forecast. But it makes it possible to look further ahead, which, of course, the Treasury does internally. It goes into more detail and explores the trade-offs. The prospects are not exciting, but nor are they calamitous. With general Government consumption kept at around its present share of 25 per cent. of gross domestic product, the standard rate of income tax edging above 26 per cent. after 1995, and allowances indexed, the public sector borrowing requirement is still not brought below 3 per cent. of GDP until 1997.
Without a clear exchange rate stabilisation policy, there would be major destabilising swings of the sterling exchange rate. So policy towards the exchange rate and its mode of stabilisation, allowing for rational market expectations, needs to be treated in the policy design process. The expected exchange rate index remains near its current level of 80. The current balance remains in deficit to the extent of 1 to 2 per cent. of GDP. Inflation rises above 4 per cent. for three years from 1996, in mild breach of the Government's target range, as the effect of the increased indirect taxes and public utility charges come through.
The growth of GDP falls below 2 per cent. in the three years from 1997, and the growth of real disposable personal incomes falls by 2 per cent. in the three years from 1996. Unemployment does not fall below 8 per cent. until 2000. All that, of course, will adapt to external circumstances. It will not work out quite like that, but that is the general picture that will follow in response to the external circumstances and internal performance as events unfold.
Such an overall prospect would not be welcomed by Government or Opposition. Can we do better? For the first time this year, the Treasury model contains a genuine supply-side effect. Investment in manufacturing industry is allowed directly to increase manufactured exports. The halt in the fall of the UK share of world exports of manufactures in the late 1980s was seized on and extrapolated in past years, without explanation, to produce hopelessly over-optimistic forecasts of the current balance. Now, a plausible, long-term explanation has been found. It is taken into account in the forecast. Could further supply-side effects be found?
The first report in this Session of the Select Committee on Science and Technology drew attention to recent work, using international comparative data from the Organisation for Economic Co-operation and Development, on the effects of business research and development on total factor productivity, and linked that with other recent work assessing US experience with research and development tax credits. Taken together, those analyses suggest that an R and D tax credit, with supporting measures and within European Union rules, could increase the rate of growth of GDP by 0.8 per cent. per annum within five years.
The place where that would start, because it would act on competitiveness, is in manufactured exports. Putting it in there alone and not into the rest of manufacturing output, which contributes to domestic consumption, and applying the same policy rules to the better-performing economy, we get an improved picture. Of course we do, but how


much? Income tax can be kept to 25 per cent., and growth does not fall below 2 per cent. per annum. Unemployment falls below 8 per cent. in 1996 instead of 2000, and to below 5 per cent. in 2002, by the end of the next Parliament. There would be more supply-side effects to go for if hard evidence could be found—as we found with R and D incentives—of the effects of investment incentives and improved training, let alone special employment measures.
Can such results be believed? Do they offer a viable approach to more stable economic growth? Certainly, they need double-checking and cross-checking. Sound judgment will still be needed, and there will, of course, be remaining risk and uncertainty. The macro-economic modelling consortium, consisting of the Economic and Social Research Council, the Treasury and the Bank of England, which finances the academic models, is asking the modellers who are applying for grants this year for the next four years to pursue such policy analyses.
The report of the consortium, referring to my work, says that there is a need for a clearly stated framework for economic policy. It says:
The objectives and priorities of policy makers can be established (or at least postulated and, where appropriate, alternatives can be given). The modelling teams can then recommend the actual adjustment of policy instruments which would best serve these objectives and priorities, and present the expected outcomes. This makes it possible for public policy makers and businesses to see how alternative objectives and priorities affect the expected results. Teams could participate in a number of policy advice exercises.
Those are not my words, but those of the consortium—the Economic and Social Research Council, the Treasury itself and the Bank of England. Economic policy-makers now have a firmer basis for judgment if they have the wit to use it.

Mr. Richard Spring: I am most grateful to you, Madam Deputy Speaker, for giving me the opportunity to make a few brief comments this evening.
As we look back over the past two years, it has been clear that we have been slowly but surely in a recovery process. As with all such processes, it has been somewhat patchy. We have seen regions and industries recovering at different rates. But there is no doubt that the economy is recovering for everybody to see. What is somewhat different about this recovery, given that it has now been going for that long, is that the "feel good" factor remains low.
I read in one of the Sunday papers that some 70 per cent. of people believe that we are still in a recession. That is despite the fact that the economy is growing by nearly 3 per cent., unemployment has fallen by some 330,000 and many other indicators look good. Indeed, the OECD and other economic forecasters have made very positive observations about the British economy.
For decades, the "feel good" factor has been linked largely to property prices. Monetary and fiscal policy has been inextricably linked to that process. Since the war, the result has been something of a rollercoaster in interest rates as we have sought to revive the economy by lowering interest rates and encouraging activity in the property market, then cutting down on the revival by jacking up interest rates again and depressing property activity.
Unfortunately, time and again, the "feel good" factor that has resulted has led to a hangover. But what is unique about the economy now is that the recovery is happening with low inflation and low interest rates, without any visible inflationary pressures, without the traditional recovery and, indeed, sometimes, speculation in the property sector. The evidence is very clear. Is that necessarily a bad thing? Is a strong property revival essential to sustain growth? On the contrary, we appear to have healthy economic growth free of all the property shenanigans of the past few years. That bodes extremely well for the future.
The distortions which have undoubtedly been caused by mortgage relief in the past are now withering on the vine. Next year we shall see tax relief reduced to 15 per cent. I hope that that process will continue, except perhaps for first-time buyers, until the tax distortions disappear altogether. They have been part and parcel of the yo-yo in interest rate movements that has paralleled the yo-yo in property prices that has been wholly unwelcome.
So we now have in prospect economic recovery with stability, without the property element involved. I am confident, as we look at the economic indicators and the lack of any inflationary pressures, that my right hon. and learned Friend the Chancellor, in maintaining the course that he is successfully pursuing, will bring about low inflation growth for many years to come.
As other hon. Members have observed, we were hit during 1994 by weakness in the bond market. Traditionally, weakness in the bond market comes about through inflationary expectations. But where, indeed, is the inflation? It certainly does not exist at the factory gate or at the retail level. It has been limited to a number of commodities. The rot started in the United States, where people saw the signs in the US Government deficit and foresaw it increasing yet again as a result of the proposed spending plans of President Clinton.
Another factor has been the illiquidity of world capital markets. Given the volatile nature of the world capital markets and our need to continue to borrow, it is vital that we continue to scale back our deficit. Between 1993 and 1996 we shall cut our budget deficit by some 4.5 per cent. of GDP. Despite that, spending will continue to rise next year and the year after that. We need to support my right hon. Friend the Chief Secretary to the Treasury in the spending round to ensure that we keep public expenditure in check.
The post-war experience of Japan is certainly instructive. The Japanese economy is now maturing and it has its problems, but much of the Japanese success story has been based on access to capital at low interest rates. Low interest rates have attracted borrowers and investors because they have believed in the coherence and stability of Japanese fiscal and monetary policy. Japanese business got its reward because the Government played their part. Low interest rates and low inflation have been at the heart of the Japanese post-war recovery. Now here in Britain we have policies which are taking us along that route. It is already happening and that bodes well for the future.
Under the great welter of macroeconomic statistics there are sometimes good stories to tell. I should like to relay the experience of my constituency. I am happy to relay to the House that unemployment has dropped by some 20 per cent. in the past 12 months. We are seeing a revival in the local economy. Bury St. Edmunds has the


lowest unemployment in East Anglia. The agricultural sector is in good shape. The two United States air force bases in my constituency are expanding.
By far the largest employer in my constituency is the horse-racing industry. On Saturday my right hon. and learned Friend the Home Secretary visited the town of Newmarket and saw for himself the increased number of owners, the increased number of horses in training and the rising price of blood stock. That vital part of the economy of west Suffolk is fully in revival as a result of the help of Treasury Ministers, to whom I am enormously grateful, as are my constituents.
Apart from that benign situation in the western part of Suffolk, we have a constellation of good overall economic indicators. I sat here this afternoon and recalled the words some months ago of Bryan Gould. He said that the Labour party had no proposals on macro-economic policies, specifically on interest rates, money supply or any of the key elements of taxation that go to make a coherent economic policy. Nothing has changed. We have certainly heard that today. No serious attempt has been made to present any coherent alternative.
We know one policy of the Labour party. It would be hugely destructive. I have spoken to many employers in my constituency about it. It is minimum wage legislation. We know that in Spain and France, where there is similar statutory wage legislation to that proposed by the Labour party, youth unemployment is tragically high, with all the consequences that flow from that. We certainly do not want to see that here in Britain at any price.
We cannot survive as a nation without exporting. I should like to take this opportunity to welcome the initiatives taken by the Department of Trade and Industry to promote exports for our business men and women. It has also undertaken an initiative to have 100 individuals seconded to the DTI from key British companies. It will help them and the DTI in the spirit of enterprise to enhance our export capabilities. That is welcome.
The Organisation for Economic Co-operation and Development has said that we have made major strides in restructuring our economy. As we survey the current economic scene, we can see that the restructuring is paying off in a truly sustainable way. The Labour party knows in its heart of hearts that that is certainly the case. Therefore, I look forward, Madam Deputy Speaker, after the next general election to continuing to sit on your right hand side.

Mr. Geoffrey Robinson: We have heard from the last two Conservative Members who have spoken that the key to our economy is the horse-racing market at Newmarket and car boot sales in Wolverhampton. As the hon. Member for Wolverhampton, South-West (Mr. Budgen) put it, there is no difference for him between a car boot sale and a motor car sale. I am proud to speak for the west midlands and I declare my interest as a chairman of a public limited company that supplies the United Kingdom, European and world motor industry. For us there is a world of difference.
The increased size and rate of growth of the United Kingdom motor industry is much to be appreciated. We are glad to see it take off after the most dismal years in its history, engineered as only the Conservative party could, with that marvellous disregard for the interests of British

manufacturing, to give it the worst two years since the second world war. After such a bad period, it is inevitable that things will get better.
I was a little surprised to hear my hon. Friend the Member for Motherwell, South (Dr. Bray) say that his model showed that, if the Government had followed that model, their economic policy would have been better. Anything would have been better than the economic policy of the Government since about 1989 to 1990. Nothing could have been more cack-handed or better conceived to produce exactly the opposite of the Government's stated purposes of policy than the economic and industrial policy that they have pursued.
I pay a personal tribute to the maiden speech by my hon. Friend the new Member for Monklands, East (Mrs. Liddell). Having heard her today, I am sure that she will be a most successful and distinguished successor to the late John Smith. I am sure that all my hon. Friends will join me in saying that, having heard her remarkable maiden speech.
All that we can say about the Government's economic policy is that they have stopped digging a great hole. They have finally started to dig themselves out of it. As is always the case, if one creates a big enough recession, one comes out of it. There is nothing remarkable about that. We saw it back in 1966 when we abandoned the plan for growth and decided to go back to the old Treasury policies of cutting and recession. Sure enough, the balance of payments came right and unemployment increased. Sure enough, two years later in 1970 the economy was booming again. We have always seen that old pattern. The only difference in this case has been the length, depth and frequency of the recessions engineered by the Government since they first came to power 15 years ago. Three recessions in a decade must be a record.

Mr. Oliver Heald: Two in 15.

Mr. Robinson: No, there have been three. All were marked by a continual pattern of boom doom, go bust, stop and go. Throughout economic policy, we have seen that pattern under this Government and previous Governments. It has been as simple as that.
Now that we are coming out of recession, the Government display nothing but the usual complacency that all is well. Of course, all is not well. None of the fundamentals in the British economy has changed. All that has changed is that we are at a different stage in the stop-go cycle. Instead of being complacent and thinking, "God, we have got rid of that; we have managed to win an election despite the recession"—a remarkable achievement—the Government should ask what they can do to put right the fundamentals of the British economy and British industry. All that the Government are trying to do is settle their internal differences and divisions in the hope of trying to smooth their way to the next general election.
Nothing is more apparent than the total disdain and mutual incompatibility between the Chief Secretary to the Treasury and the Chancellor of the Exchequer, who put a scarcely credible distance between themselves and could not bear to look each at during the debate. I have not seen that since we had the remarkable spectacle of the occupants of No. 10 and No. 11 Downing street not speaking to each other, but choosing to disagree every time that they did speak. I am pleased to see the Chief Secretary deny it. It has been denied on previous occasions too.
I doubt very much that the Chief Secretary will be operating from his current position in a week or two weeks' time. I am sure that he will not. One of the chief reasons for that is that cohabitation between him and the Chancellor of the Exchequer has become impossible, as it is throughout the ranks of Conservative Back Benchers, who agree about nothing other than some implicit, sordid deal to patch over their differences in an attempt to win the next election. This time, that will not work.
Meanwhile, the job of getting the British economy and British industry right, and the need for investment and a policy on exports and industrial investment, goes by the board. What causes most concern about our recovery is that, unlike the German recovery, it is based on consumption. Although we welcome the growth in the home car market, we need to achieve a massive increase in car output. There has been an increase, but it is nowhere near enough. We need to achieve a massive increase in exports. We have achieved some improvement, but it is nowhere near enough.
The trade balance and the public sector borrowing requirement deficits remain far too high. Although the Government might smooth over the problems for a couple of years, in three years' time, we shall return, as we always have before, to the same old problems of the endemic, structural weaknesses of the British economy and manufacturing industry. They go hand in hand. They are diferent sides of the same coin.
What have the Government got to offer? Nothing except a policy to try to nudge through the next week, the next set of figures and the next problem. They will deal with anything but the real problem, whatever it is.
A few people tell us that Germany is in great trouble. Germany is a massive continental power of 80 million people. It has invested enormously in the former East Germany. In the eastern countries on its border with the former Soviet Union, countries in the far east and in China —where its investment is much higher than our investment —it is emerging as the powerhouse of the European Union. We shall be a tiny island, a sideshow compared with what is going on in Europe.
That is a future that the Chief Secretary may welcome. I happen to share many of his views and reservations about the common currency and the so-called purport of the Franco-German alliance. But running away from the problems will not help our problem; and trying to pretend that we have achieved growth in gross domestic product and in income will not hide the basic problem that the Germans and the French are investing in productive output and in the strength of their economies, but all that we are doing is achieving growth out of consumption.
That is the central problem of the recovery. That problem is bound to come home to roost. That is why in the foreign markets sterling is still so weak. For the moment, the attention is on the dollar, but where will the international currency markets focus their attention next? It is bound to be on sterling, and sterling's weakness will therefore be exposed.
We need a policy for our manufacturing industries, exports and investment. We need a policy that will encourage growth in investment and exports. We must understand net exports. As we all know, exports are not enough if our our propensity to import is disastrously high.
Unless there is a policy for the growth of net exports and for investment in manufacturing, and unless a series of projects are geared towards that, in two years time we shall be back to where we were two years ago. That is the sum total of Government policy. The country deserves far better.

Mr. Richard Ottaway: The hon. Member for Coventry, North-West (Mr. Robinson) should have read the Evening Standard—not a paper that traditionally supports the Conservative party—three weeks ago, when it carried the headline "Triple Whammy". The article in question talked about the Government's good economic news of the past few weeks. That headline said it all. It referred to the fact that unemployment and inflation were decreasing and to the fact that productivity was increasing. Perhaps it should have read "Quadruple Whammy" or "Quintuple Whammy", as retail sales and manufacturing output have also risen. Many of the hon. Gentleman's comments did not add up; and, unfortunately, owing to lack of time, I cannot answer the points that he made.
Of the great whammies referred to in the Evening Standard headline, inflation was the most important. If one buys a property, the three most important rules are location, location and location. If one tries to run an economy, the three most important points are inflation, inflation and inflation. Our respective inflation policies illustrate the differences between the Conservative and Labour parties.
The Labour leadership election has been more revealing of Labour party policy than any speech in the House. The right hon. Member for Derby, South (Mrs. Beckett) said that jobs should be a higher priority than inflation—and the fact that the hon. Member for Kingston upon Hull, East (Mr. Prescott) said that low inflation and low employment were mutually incompatible shows the distinction between the two parties. To take a comment by a previous Chancellor of the Exchequer, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), and turn it round, the Labour party is now saying that high inflation is a price worth paying for lower unemployment.
I am pleased that in his Mansion house speech, my right hon. and learned Friend the Chancellor rejected that approach and said that he was not prepared to throw away the hard-won gains of recent years—he did not want Britain to go into a boom that we all knew would be followed by a bust. I must say that talk of a boom takes those hon. Members with seats in London or the south-east a little bit by surprise, as unemployment remains stubbornly high. But the recovery is now stronger than expected.
The first reaction to the Chancellor's Mansion house speech came from Lord Lawson, who disagreed, saying that one could not stop the ups and down of the economic cycle. As he saw a few ups and downs in his time as Chancellor, one has to say. "He would say that, wouldn't he?" Both Chancellors are right. One cannot flatten out the economic cycles but one can do as the United States of America has managed to do and make them less violent. With a different approach to economic policy, the United States had a shorter and shallower recession.
Why should we, as members of the governing party, be believed when we say that history will not repeat itself and


that inflation will not run away again? First, we have a clear determination to get public finances under control and to control public expenditure. The defence statement and what I am hearing from the Department of Social Security is encouraging and leads me to believe that we will, indeed, get public expenditure under control. In addition, the public sector borrowing requirement is perhaps now lower than we originally thought.
The second reason why we shall be believed about our efforts to control inflation is that the minutes of the meetings between the Government—the Chancellor—and the Bank of England are now published. It has dawned on everybody what a significant step publication represented: it makes it impossible to abandon the battle against inflation for a quick political fix.
That battle remains finely balanced. The good news is that there is no house-price inflation. House prices are not soaring as they did in the late 1980s, primarily because of the erosion of mortgage tax relief and the rise in fixed-rate mortgages. Buyers are no longer putting their last pound into property, so I hope we shall see an investment-led recovery rather than a housing-boom recovery.
All the indicators are set to green, and the danger is that inflationary pressures will build up. I remind the House that the target for inflation is between 1 and 2 per cent. by the end of this Parliament. The acid test of the Government will be whether, having reduced interest rates for some years, they will be prepared to increase them if circumstances require it. Monetary policy is extremely loose.
Real interest rates are very low, but long-term interest rates are quite high and the gap between the two is quite substantial. The market expects interest rates to rise, and that is confirmed in the Bank of England's inflation forecast. I have no doubt that the tax rises will take some heat out of the inflationary pressures and that the imposition of VAT on gas and electricity has barely started to bite, but we must raise interest rates if necessary—coupled with tight control of public expenditure in the November Budget if appropriate.
My great surprise is that the public are still not aware of the recovery. As my hon. Friend the Member for Bury St. Edmunds (Mr. Spring) said, some 70 per cent. of the country still believe that we are in recession. There is no doubt that unemployment is still a problem, particularly in the south-east, but one of the signs that things are beginning to turn is that skill shortages are appearing.
The disappointment is that the recovery has not led to a rise in confidence in the City. In the past six months, the stock market has gone into substantial slide, which has probably been linked to the interaction between the yen and the dollar and the herd-like instincts of fund managers in the City in following the New York markets. There has been scepticism about the American Government's handling of the economy, and a leading American forecaster said the other day, "Whenever a Government spokesman says something about the US economy, I think, `Sell'."Only two weeks ago, the United Kingdom market finally broke away from the American market and there has since been a 4 per cent. rise in our stock market, which shows that fund managers are placing reliance on our own instincts and our own good results rather than worldwide indicators.
We must remain competitive to sustain recovery. As the President of the Board of Trade is well aware, having just published his competitiveness White Paper, we must

change and move on. The City should become more involved in companies' and industries' future and economic well-being.
Everyone must change their attitudes. I believe that the modest proposal from Mr. Alistair Ross-Goobey, chief executive of Postel, one of the largest fund managers in the City, to abandon three-year rolling contracts and replace them with two-year rolling contracts is a step in the right direction, showing that institutions can and should change their attitude to and involvement with the City.
We must aim to be the world's best, but if that is our aim we are already out of date because the world's best have already moved on. We have the ability to be the world's best and I support the motion.

Mr. Alan Milburn: This debate has been characterised by much false optimism from Conservative Members. According to them, the green shoots of recovery promised so long ago by the former Chancellor, the right hon. Member for Kingston upon Thames (Mr. Lamont), are finally blossoming and everything in the garden is rosy. I am afraid that most people outside this place probably would not recognise that picture.
The recovery is far from well established, with much uncertainty and lack of confidence prevalent among consumers and industrialists. They know that the Government are promising a false dawn yet again, for they have not forgotten that £7 billion-worth of tax rises are still in the pipeline, with 10 more Tory taxes on the way.
It will take more than a puff of hot air about full employment and a visit to a TUC conference to convince people of the Government's ability to manage their way out of the economic mess that they have created. The public will know that Ministers have been forced to talk the language of full employment not by the misery of 3 million people being without jobs but by the threat to their own jobs from the consequences of their economic and political failure.
The Government's conversion to the merits of full employment is belied by their actions. There is no Treasury forecast for unemployment. I notice that there is a forecast— quite rightly, because these things are significant— for growth, inflation, the trade balance and the public sector borrowing requirement, so why not for unemployment? The answer is simple enough: the projected growth rate of 2.75 per cent. is simply not enough to reduce unemployment to anywhere near its pre-recession levels. Interestingly, while the number of people on the unemployment register is falling, claimants clearly are not going into jobs. The number of people in employment fell by 73,000 in the last quarter and by more than 100,000 in the last half year. No wonder the air is thick with accusations of statistical jiggery-pokery.
The conjuring trick has been given a new slant by documents released to me—or, rather, leaked to me—in the past few weeks from the Employment Service, which show that unemployed claimants are being deliberately offered low-paid, hard-to-fill vacancies in out-of-the-way parts of the country to try to con them out of their benefits. Ex-miners, who have been made redundant through no fault of their own, risk losing their benefit entitlement if they turn down jobs as hairdressers, debt collectors and so on. That seems to be the Government's vision of the future


—less concern for unemployed people than for meeting artificial Treasury targets imposed by Ministers and a low-pay, low-wage, low-skill and no-hope economy.
If there was any correlation between forcing down wages and driving up employment, my region would be the boom region of Britain, but the north has the worst of both worlds. We are the low-pay capital and we have had the highest regional unemployment in every month since the Conservatives took office in May 1979. Nor is it just the north that is suffering. Between March 1990 and March 1994, unemployment in the previously prosperous south-east almost trebled. That has been the Government's triumph—the creation of a level economic playing field, where economic dislocation and devastation stalk the whole land from John O'Groats to Land's End. That is why, north and south, the Government's false promises will not be believed.
The Government's record tells its own story: it is a record of low growth and high unemployment; of deceit and broken promises on tax; of a failure to pay our way in the world, with record trade imbalances in the past few years; of casualisation of employment; and of one of the worst levels of investment in skills training, research and development and manufacturing. That record promises no long-term future of sustainable growth for our country or its citizens. Britain will succeed only if we can harness the strength of every part of Britain. If we allow any region to decline, economic and social decay will result and the ability of the whole economy to compete will be weakened.
The structural unemployment that characterises so much of our nation is a symptom of political failure. It is wasteful, inefficient and, most of all, unnecessary. However, it is the direct by-product of a market-driven approach, determined from the centre, which ignores the regional impact of central Government policy. That approach failed in the 1980s and it will fail again in the 1990s.

Mr. Heald: If the hon. Gentleman looks across Europe, he will see far higher unemployment, particularly in countries such as Sweden which have followed the kind of philosophy for which the hon. Gentleman is arguing. Can the hon. Gentleman see other reasons why unemployment is high in Europe but low in Britain? Perhaps unemployment is low here because of the flexibility of the labour market. What does the hon. Gentleman say about that?

Mr. Milburn: I would not call between 2 million and 3 million unemployed a low figure. That is a direct insult to those people who are out of jobs and reflects the complacent attitude that we have seen throughout the debate. The Government seem to be content to sit on their laurels and rest with the achievement—if that is what it can be called—of creating 2.5 million unemployed. I do not know about Conservative Members, but people in my part of the world are not happy to sit back and satisfy themselves with that kind of record.
The current structural unemployment is a disgrace and it is quite unnecessary. During the 1980s, the market-driven approach produced an overheated south and an under-resourced north. Pressure on the green belt,

labour shortages and crazy property prices sat side by side with under-utilised industrial sites and unemployment—and that in regions just 200 miles apart.
A sensible Government would have redirected spending to mop up excess supply and to dampen down excess demand by switching investment priorities. Instead, the brakes were slammed on: interest rates were forced up, plunging the whole country into a deep and damaging downturn. The recession, which was born and bred in the south of England, grew into a Frankenstein's monster that stalked the whole land.
Quite simply, Britain's centralised decision-making process could not produce the necessary flexibility to deal with the differing needs of different parts of the country. Instead, it treated the whole nation as though Liverpool and London were exactly the same.
No other industrial nation has such a centralised decision-making and financial system. Indeed, the success of economies such as that in Germany is built on the sure bedrock of decentralisation and devolution. Public banks are organised in such a way that they are embedded in the local and regional clusters that make up the German success story. That approach has been underpinned by a more widespread diffusion of economic and political power to ensure that industrial enterprises across the whole nation and in all regions receive the lifeblood of investment that they need to survive and to compete.
In this country, long-term sustainable growth is dependent on the adoption of industrial and employment policies that place the premium on investment for the long term in all regions of Britain. However, in this country there is no proper annual regional audit of public spending and no regional element to monopolies or mergers policy. There is no attempt to diffuse outwards the centralised financial structures that dominate the United Kingdom economy. Instead, we have the absurd spectacle of a Government cutting regional aid spending during a recession—

Mr. Deputy Speaker (Mr. Michael Morris): Order. I call the hon. Member for Canterbury (Mr. Brazier).

Mr. Julian Brazier: I will not try to follow the hon. Member for Darlington (Mr. Milburn) down his route. I want to begin by declaring an interest. I placed a substantial bet last week, not on one of the horses of my hon. Friend the Member for Bury St. Edmunds (Mr. Spring), but with my bookmakers, the IG Index, on the sterling contract that short-term interest rates would not rise as fast as the market thinks that they will. I did that because I have such confidence in -the Government's anti-inflationary abilities.
Two years ago, I made a speech in which I took the then rather fashionable view that monetary conditions were too tight while the fiscal position was too loose. Since then, the Government have taken several sensible steps to control the fiscal position. However, I may be almost alone tonight in arguing that the monetary position is still too tight. How can that possibly be when short-term interest rates are at their lowest for a generation?
In my speech two years ago, I quoted Professor Tim Congdon's model, but I suggested that he did not include a major factor—the massive one-off impact on the monetary figures that the changes in the housing market


were likely to have. Professor Congdon kindly sent me his latest document a couple of days ago, and I was intrigued to see that he devoted all the copy to that subject.
If Professor Congdon's approach is now correct—I argue that he has not gone quite far enough—we should be profoundly interested for three reasons. First, it will mean that our inflationary projections are, if anything, not optimistic enough. We really have beaten inflation in the medium term. Secondly, it will mean that in the medium term our outlook for a healthy economy is even better than impartial observers such as the Organisation for Economic Co-operation and Development are suggesting, but— this is an important and significant "but"—we may have, in getting from here to there, a significant monetary glitch to cross.
The broad money supply today is growing at only 3.1 per cent. Coincidentally, that is almost exactly the rate at which it was growing two years ago. If the one-off surge in money lent to speculators of various sorts is removed, the actual growth in broad money is only about 1 per cent. In other words, for the first time in a generation at least, and as far back as we have a really good record for broad money, there is a sustained shrinkage in the real money supply.
That is backed up by several subsidiary factors. For example, the growth in wages is running at only 3.75 per cent. Given the rapid expansion in productivity at the moment, that is only just a real increase. Most significantly, I want to focus on the workings of the housing market.
The housing market is difficult to measure because there are so many indices. They include the Halifax and the Nationwide and can be seasonally adjusted or not. However, they all show that, as I suggested might be the case two years ago, the housing market has not recovered. I believe that it is right that it should not recover. Lower property prices are healthy.
Why has the housing market not recovered? First, we must consider the inflationary factor. People believed that it was worth spending more money on a house if, because of the fall in the value of money, the debt that they borrowed would erode vis-a-vis the house price. Secondly, we must consider the fiscal factor, in that the real value of mortgage interest relief has declined. However, thirdly and crucially—I believe that all the economists who focus on housing have left this factor out of the picture—we must consider the geographical impact of the collapse in the cost of travel to the continent which occurred at the same time as the introduction of the single market.
The massive disproportion in house prices in northern France and southern England cannot be sustained indefinitely. Some of my constituents are moving across the channel to retire and people are selling second homes in my area, and I am sure in other areas in southern England, and purchasing properties from estate agents advertising their wares in English in northern France.
That factor could, in the 1990s, match in reverse the one-off inflationary impact of the liberalisation of credit in the 1980s, which gave us such problems with the monetary indicators then and which fed through into a most unexpected burst of inflation in spite of apparently high interest rates.
We might appear to have low interest rates now, but they are not as low as they seem. Long-term interest rates at 8 per cent.—that is, a real rate of 5.5 per cent.—are quite high. A short-term base rate of 5.25 per cent. is not as low

as it looks, because the banks have widened their margins. It is certainly nothing like as low as the 3 per cent. which the Americans, whose economic experience is much closer to ours than to our European partners, chose to sit at for some time. Even if those rates are as low as many people believe, the impact of that one-off, massive, painful adjustment in the housing market—I am convinced that, it is a good thing in the long run, but it is monetarily painful in the short run—will cause a one-off shrinkage in the money supply, which could give us a bumpy ride over the next year or so.
The reaction to that is easily coped with, and the clear water is on the other side—non-inflationary growth on a major scale, and with the extra bonus that, because money is no longer being channelled disproportionately into bricks and mortar, it will be available for the investment which Opposition Members have mentioned and which we would like to see boosted in industry. It is noticeable that those countries which have been most successful economically are often those in which home ownership levels are not especially high and house prices are not particularly high in terms of the economy. Switzerland is a good example of that.
We must be ready to take swift monetary action if the broad money figures become any lower. That can mean only one of two things—either keeping the base rate down or even lowering it further, in which case I shall make even more money at the bookies than the little bit by which I am ahead already, or being willing to tackle the other end of the interest rate curve, which would be my preferred solution, by reducing the amount to which we fund the deficit so that we get broad money moving again. That course is potentially rocky.
I shall devote the last couple of minutes of my speech to ways in which we can tighten the fiscal position a little further. Like most hon. Members, I believe that a gently expanding money supply and a tightening fiscal position will deliver the non-inflationary growth that we need. First, I firmly believe that we should go the whole hog on social security spending and introduce identity cards and a proper central register, which would be the single most effective way to tackle fraud.
Secondly, as I have proposed in previous debates, and as I have a university in my constituency, we should fund the remarkable growth that we have achieved in higher education by going even further toward student loans. In the long run, grants should be confined only to certain specialist groups such as mature students and those with other special positions.
Thirdly, we must reconsider the scope for legal aid. We have narrowed the group of people who are eligible, but we have not narrowed the type of cases that they can bring. For example, pensioners in my constituency can dispute a garden hedge, and, having spent £20,000 of their own savings, can ask the Treasury to fund the next stage of the dispute—incidentally, the case was brought against a war hero who has lost a leg—at the taxpayer's expense. I find that incredible.
Fourthly, we should look again at home improvement grants, which are frequently paid to people with substantial incomes and which result in a one-off capital gain for those people. Why should not grants be repaid on the sale of the house?
Fifthly, like other hon. Members, I believe that we have to look again at housing benefit, but not by sharpening the taper still further and screwing down still more tightly on


those with modest savings. The way to tackle housing benefit is by recognising that we have a largely artificial property market in many areas because most people in rented accommodation in some areas are now on housing benefit. The answer is to limit the amount which councils are allowed to pay, thereby bringing down prevailing rents.
I end where I started. I declared unnecessarily my interest because I thought that it was right to do so. I am betting that we have beaten inflation.

Mrs. Anne Campbell: It is rather interesting that no Conservative Member has referred to this as a "feel good" recovery. I refer to it as a "feel no better" recovery, which is certainly an improvement on feeling worse, and probably very much preferred to the "feel good" recovery which ends in inflationary tears. That is not my phrase, it is the phrase of a well- known journalist who writes for The Guardian. As he rightly comments, the real question is whether the "feel no better" recovery will fizzle out or end in an inflationary boom.
The problem that we face is the lack of industrial strategy, which is the worrying aspect of the Government's approach. The Chancellor admitted this afternoon that investment in industry is not increasing as he would like. The recovery is being led by consumer spending, not by investment in industry. Too much of our consumption is of goods that are manufactured abroad, which is increasing our trade deficit and producing longer-term inflationary pressures.
Over the past 15 years, we have seen the decimation of our manufacturing industry. That in itself must have shown some of us at least that it is essential to have an industrial strategy that will help to rebuild the desperately needed manufacturing industry. We need a strategy that will help put our people back to work and help to use our skills and expertise to their best advantage.
People are often surprised when I tell them that unemployment in the Cambridge constituency is about the same as the national average. For some reason, people always think that Cambridge is one southern constituency with low unemployment. Some 3,400 people are registered as unemployed in my constituency. The rate is 9 per cent. overall. One reason why unemployment is not much higher than that is that we have good reason to be grateful for the strong growth of the small high-tech firms which have dominated the industrial scene in my area. That has developed despite the Government, rather than because of Government policies.
I should like to talk about the importance of high-tech firms. Although that is not the only small business sector that we should support, it is extremely important because it provides interesting and satisfying work. It is not part of the low-skill, low-tech economy that the Government are trying to promote, and it is an essential way of capitalising on our skills and expertise and enabling manufacturing industry to benefit. Through the promotion of high-tech industry, we can achieve economic growth and increased employment and, at the same time, ensure that our manufacturing industry improves its competitiveness.
Last weekend, Cambridgeshire county council published a survey of 1,000 companies in Cambridgeshire, which showed that there has been 7 per cent. growth in

high-tech jobs in the past two years. In the city, more than one in eight of all employees work in high-tech industry, and in the surrounding villages the proportion is one in five or higher. It is a crucial part of our local economy.
In the past two years, an additional 1,900 high-tech jobs have been created, bringing the total to more than 27,000 in the county, including an extra 500 jobs in research and development. Some of those jobs replace jobs that were lost in other sectors, and many of them are financed by European research and development money. Thirty-two per cent. of those jobs are in the city of Cambridge, the great majority of them in my constituency.
Without those jobs, the unemployment rate would treble, and I would be talking about not 9 per cent. but 27 per cent. unemployment. That is higher than the levels in Tottenham, Liverpool, Hackney and Monklands, East—my hon. Friend the Member for Monklands, East (Mrs. Liddell) referred to the latter in her maiden speech.
I hope that the Government will take due note of an excellent report that has just been published by the Advisory Committee on Science and Technology. The report, entitled "Innovation and the Tax System", makes several recommendations, some of which I hope that the Government will implement, which have been part of Labour party policy for a long time. It suggests, for instance, a detailed study of the relationship between the UK tax system and the innovative activity of UK-based businesses.
The momentum of innovation depends on access to financial and other resources. The tax system is important in determining post-tax profits from which businesses can finance such innovation. A technology-based firm in my constituency, Xaar, has developed an ink-jet printing system and a range of complementary inks. Several million pounds raised from venture-capital organisations in the UK and Europe have been invested in the development of that technology. Xaar has been successful in seeking licences for its technology, and has concluded agreements with major Japanese office manufacturers, IBM Sweden and, most recently, Zeneca Colours Ltd.
Under the terms of the agreement with Zeneca, together with the Xaar chemists, a programme of joint development to produce top-quality inks to service the market being created by Xaar's printhead manufacturing licensees is being embarked on. The key element of that agreement is the joint development programme, and the transfer of Xaar know-how and technical information.
Xaar was shocked and disappointed to find, when the first payment came in under the licence, that a deduction of 25 per cent. had been made to cover tax. The trouble is that Xaar will not be able to recover that amount until it is in a position to pay corporation tax—which, given the accumulated losses arising from the development, will not be for several years.
Xaar's chairman wrote to tell me of those developments, adding:
The strangest factor is that had Xaar concluded a deal with an overseas manufacturer then the income would not have been subject to 25 per cent. withholding tax. Even licence fees and royalties from Japan have only 10 per cent. withholding tax.
The chairman makes the following plea:
We ask the question, why do the UK tax laws seek to penalise companies like Xaar who are engaged in keeping British technology at the forefront of product development.
I believe that our tax system could do a great deal to develop small high-tech firms. My hon. Friend the Member for Motherwell, South (Dr. Bray) referred to tax incentives


that would help not only high-tech industry but many of our manufacturing industries. We should recognise that not only investment in research and development, and in equipment and machinery, but investment in people is vital to the future of our industries. We need trained people to fill the jobs that will result from the development of high-tech firms, and we need people who are free to work. Many women in my constituency already have the skills, but cannot work because of child care and other care responsibilities.
We need a strategy that will enable such people to work, will help to develop the high-tech firms that will provide the jobs and will help to turn this "feel no better" recovery into a really "feel good" recovery.

Mr. Barry Legg: I intend to concentrate on public finances. The Chancellor's summer economic forecast reveals much improvement in our general economy: the first 41 pages show a recovery over the past 18 months which is projected to continue in the medium term—a recovery based on a low-inflation environment.
I agree with my hon. Friend the Member for Croydon, South (Mr. Ottoway), who welcomed the openness initiative in monetary policy to which the forecast refers. The. publication of the minutes of the monthly meetings between the Chancellor and the Governor of the Bank of England are a significant development, in terms of both accountability and the quality of advice on monetary policy that is likely to be presented. More openness in government is likely to strengthen our institutions rather than weaken them.
So much for the first 41 pages of the forecast. The remaining nine, which deal with our public finances, paint a much less sanguine picture. Opposition Members have called for more public spending today, although they have not quantified the increase for which they have asked. Contrary to some of what we have heard from them, however, both the Red Book and the summer economic forecast reveal that public spending is alive and well, and expanding in the British economy. Despite the best efforts of my right hon. Friend the Chief Secretary to the Treasury, the controlled total over the past three years has risen by some 10.9 per cent. in real terms.
Earlier today, my right hon. and learned Friend the Chancellor attributed that increase to the recession, but I suspect that economic historians will not regard all of it as having arisen in that way. They will probably conclude that it is also due to the Government's efforts to offset the over-tight monetary policy that resulted from our membership of the exchange rate mechanism with a more lax fiscal policy.
As a Conservative, I do not support increased state intervention in the form of higher public expenditure 'when Governments follow inappropriate monetary policies. Boosting public expenditure is very easy and apparently popular in the short term, but it is very difficult to bring it down again in a modern democracy. Lobbyists and interest groups will fight to ensure that spending levels remain the same or rise, whatever the national interest demands.
So what of the future? Table 2.2 of the summer economic forecast, on page 43, shows that general Government expenditure over the next two years is set to increase from £278 billion to £310 billion—an increase of

some £30 billion; a cash increase of 11 per cent., and a real-terms increase of some 6 per cent. in a low-inflation climate.
The figures show other worrying trends. For instance, cyclical social security is planned to increase further in the coming years. That seems strange when we are experiencing above-trend economic growth: at such a time, cyclical social security would be expected to fall. As for the total social security budget, over the next two years it is due to rise to more than £90 billion. It is difficult to understand the magnitude of that figure; perhaps it would be simpler if it were expressed as the amount of tax that would have to be raised from the average family to pay for it. The average amount of tax levied on the average family to meet that social security burden would be some £4,500 per annum.
I believe that reform of social security spending is now essential. The scope and size of that budget must be reined in. As long as we put off fundamental reform of social security, our reputation for firm control of public spending and our ability to create a low-tax environment will be in danger.
When Beveridge produced his White Paper on social security, he said that the great danger was that men might become comfortable and settle down to benefits. That is the position we are in—men have settled down to benefits. The social security system that has evolved for 50 years has not helped good neighbourliness, but has set neighbour against neighbour. So often, we hear of people complaining about neighours who exploit the benefit system while they pay the taxes.
Too generous a benefit system also stops people from going back to work. The most important ingredient in getting people back to work is net take-home pay after tax, which determines the supply of labour. If people find that they receive more on benefit than they would in net take-home pay, their determination to find work will obviously falter.
In recent months, there has been significant discussion and argument about whether the United Kingdom economy can combine European welfarism and American free-market efficiency. If one accepts such a proposition, it has some inconsistencies. Free-market efficiency requires a low-tax system, whereas welfarism pre-empts the nation's resources. Even in Britain today, the state is pre-empting more than 44p in every pound of private sector resources.
Deregulated labour markets are not enough. Low tax is a necessary prerequisite for a successful free-enterprise economy. High welfare spending is not a part of that virtuous circle. High public spending usually leads to high public deficits and high long-term real interest rates, because the markets want a risk premium for the money they lend to spendthrift Governments.
We have an agenda that we must adhere to during the next two years, and we must ensure that low taxation is at its heart. To achieve such low taxation, firm control of public expenditure cannot be mere rhetoric: it has to be a commitment that we are determined to deliver. A social security budget of £90 billion must be reformed.
Last week, we heard from my right hon. Friend the Chancellor of the Duchy of Lancaster that Government running costs are £20 billion a year, or £1,000 a year for every family in this country. We must focus on reducing these levels of public spending during the remainder of this Parliament, because a low-tax economy must be an obligation that we do not dishonour.

Mr. Mike O'Brien: First, I congratulate my hon. Friend the Member for Monklands, East (Mrs. Liddell) on her impressive and forceful debut in this place. I know that my new hon. Friend will be a great credit to her predecessor.
The Chancellor forecast a golden vista of his creation —rising investment, low inflation, reduced public borrowing and lower taxes. To the public, he says, "All this and more can be yours, if only you vote Tory next time." If he thinks that the public will be so easily conned, he is wrong. They know that such forecasts come from the same crew who failed to predict the Lawson boom, ruled out the possibility of a recession, did not foresee sterling's exit from the exchange rate mechanism, and denied the need for tax increases before the last general election. Their record for forecasts is abysmal, and their record on economic management is worse.
It is true that we are climbing out of recession, but that is part of the economic cycle. It would have happened sooner if the Government had got their policies right. We stayed in recession longer than most other countries. The economic cycle meant that we were bound to come out of recession eventually, as we came out of the 1981 recession, but the Government's stewardship has left the economy in a bad state to take advantage of recovery, just as it did after the 1981 recession.
The Government cannot even claim that the recovery is a result of the success of their policies, because it is clearly the result of the failure of the policy that they set out at the last general election. The present Prime Minister was Chancellor when he took us into the ERM at an unsustainable exchange rate. It was an appalling judgment. We entered the ERM at the wrong time, the wrong rate, and for all the wrong reasons.
Massive damage was done to our manufacturing base, and a million jobs were lost as the then Chancellor, now the Prime Minister, sought to sustain what was unsustainable. Even those people such as myself, who believed that the principle of the ERM was right, knew that that exchange rate was not sustainable. Once forced to abandon their preferred policy, the Government found that a slow recovery began. Their false judgments created the recession, the damage to manufacturing and now, paradoxically, the recovery.
The budget deficit, which produced value added tax on fuel and car and home insurance, and a new airport tax, was created by the fiscal irresponsibilities of the 1980s and 1990s—primarily, by tax cuts at the wrong time, and again for the wrong reasons. I well remember the forecast that the Lawson boom would lead to prosperity. The reality was boom, bust and job losses, and it will be again, because this Chancellor does not get his judgments right, either.
Value added tax on fuel was introduced because we supposedly had a £50 billion deficit. That was his forecast and his judgment, but he was wrong. The deficit was £46 billion. He did not need to introduce VAT on fuel; pensioners and the poor did not have to be hit in that way.
The Chancellor made the wrong judgment in imposing an unnecessary burden on people, so will he remove it? He would not agree even to fail to impose the second stage of VAT on fuel when he came before the Treasury Select Committee. I suggested to him that there was no more need for the tax. He said, "Well, we're going to do it anyway."
Like his leader, who took us into the ERM at the wrong rate, this Chancellor decides when confronted with realities that the best thing to do is to ignore the pain they cause, and carry on regardless. It is the same sort of attitude that he displays towards the fundamental problems of the economy—he ignores them. The result is that the recovery is not sound.
Yesterday, David Hardisty of the Finance and Leasing Association said:
Confidence is still fragile, because there is no feel good factor at the moment. The tax rises, low wage settlements, static house prices and fear of unemployment mean people do not feel their economic situation is improving.
Sixty-three per cent. of the association's members were no more confident about their prospects this month than they were in February.
The housing market is a particular problem. In paragraph 3.28 of the Red Book, the Chancellor predicted:
Increasing confidence should lead to higher activity and prices in 1994.
He got that wrong, too, as he admitted to the Treasury and Civil Service Select Committee.
The failure of the housing market is probably due to three factors: first, confidence in recovery is weak; secondly, the Governor of the Bank of England has predicted that interest rates will rise later this month, which deters borrowers; and, thirdly, taking out a 25-year mortgage is based on the principle of being able to pay for it, and uninterrupted employment.
The new insecurity and uncertainty in the job market caused by the removal of many employment rights means that people are less likely to enter into large loans, because they are not sure that they will be able to pay them. The housing market may not be the same ever again while current Government policies continue. That will affect the need for a mood of confidence which the Chancellor predicted but which, again, has not materialised.
There is also no real evidence that the Chancellor has created one extra full-time job. That was the consensus view not only of the distinguished panel of economists who advise the Select Committee, but of his panel of independent advisers, who said in paragraph 13 of their report on the summer economic forecast:
Full-time employment has continued to fall.
It is true that people are coming off benefits, but that is for three reasons: first, changes in the benefit rules, especially on invalidity benefit; secondly, more young people are going into education; and, thirdly, the creation of more part-time jobs. However, the statistics show that full-time jobs are still not being created, and, as the Chancellor's advisers said, full-time employment has continued to fall. There are also concerns about the sort of jobs that are being created and the sort of full-time jobs that might be created, hopefully, in due course.
If recovery is to be sustained in the long term, we need an export-led recovery; we need a recovery primarily in manufacturing. The damage to our manufacturing base in the recent recession has been enormous, but as Professor Christopher Johnson pointed out, the damage to manufacturing investment under the Tories has been long-term, rather than only during the current recession. During the period 1982 to 1992, while capital stock in finance and business rose by 107 per cent., in trade and tourism by 57 per cent. and in other services by an average of 38 per cent., capital stock growth in manufacturing industry was only 14 per cent. That has left manufacturing weak over the past decade.
As the Chancellor's economic forecast acknowledges, that has led the Confederation of British Industry, in its measure of capital utilisation, to say that the manufacturing sector is already close to its normal level of utilisation. There is little spare capacity left in manufacturing; spare capacity is in other sectors. That means that, even if we are able to bring ourselves slowly out of recession and into recovery, the manufacturing demand is unlikely to be able to met domestically, and we will have to import products.
If we are not careful, and if there are no changes in policy, we are then looking at a balance of payments problem, certainly in the next year. Manufacturing is fundamentally weak, after years of neglect. That is why my hon. Friend the Member for Dunfermline, East (Mr. Brown) has called for policies to encourage investment in manufacturing, and to tackle the skills deficit in Britain.
Any modern western economy should have managed a sustained growth rate of 2.2 per cent. over the past decade or more. We did that before 1979; we should have been able to do it after 1979. As Professor Johnson has shown, an output gap has grown since 1979. Under the Conservatives, the economy has gone from boom to bust, but throughout that period it has under-performed.
Professor Johnson predicts that the current massive output gap will take five years or more to close, even at the current rate of growth. It will take five years of the current growth rate to take us to where we should have been if there had been prudent stewardship of our economy. It is a miserable record. In the 1990s, the growth rate is likely to be an average of only 1.6 per cent.
We also have the highest taxes on record. The Conservatives like to say that they are the party of low taxation, and argue that the present tax rises are a temporary hiccup. However, that is not true. Recently, my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore) gave the Treasury and Civil Service Select Committee statistics from the Library of the House. Their effect was devastating.
In 1978–79, the ratio of tax to gross domestic product was 34.3 per cent. In every year up to 1993–94, it was a higher proportion of gross domestic product than in 1978–79. This year, it is 34 per cent., but it is set to rise to 37 per cent. in 1994––95 and 1995–96. That is not a temporary phenomenon or a hiccup.
If hon. Members think that the statistics for 1978–79 are somehow or other an aberration as far as the Labour Government were concerned, it is the case that the figures for 1975–76, 1976–77 and 1977–78 were also lower than for almost every year under the Conservatives. The data show that it is simply a myth that the Conservatives tax less than Labour. It is true that the Conservatives tax the rich less than Labour, but, for the working class and for middle-income families, Labour's tax policies not only cost less but are more progressive and fair.
A married couple on average earnings with two children in 1978–1979 paid 34.2 per cent. of their earnings in direct and indirect taxation. In only one year from then until 1992–1993 does the proportion fall below that, and that was 1979–1980, following a Labour tax cut. In every single year since 1980, a typical family has been taxed higher under the Conservatives.
That leaves the debatable point about whether Labour would or would not have taxed higher than the Conservatives in the 1980s. But it is not debatable that,

since 1979, under Mrs. Thatcher and the present Prime Minister, the Tories have taxed more than Labour Governments.
The Chancellor cannot be relied upon to get it right. His judgment is unsound, and he and his predecessors have made too many bad judgments in the past. He has no clear view of where he is going, he has not addressed the fundamental problems of the economy, and he does not have solutions for those problems. The Conservatives seem to see their only hope in trying to extend the policies of the 1980s—the "me decade"—into the latter half of the 1990s, no matter that tax cutting and trickle-down economics were supposed to lift all the boats, but have instead lifted only the yachts and damaged the harbour in the process.
Labour rejects that. We want to move from the "me decade" policies and to make the 1990s the "we decade". We say that, unless the many prosper, none will. It is for that reason that I say that the electorate will not be conned again by the Chancellor's predictions of prosperity. The Government have got it wrong far too often, and they have got it wrong again. The electorate know that, and they will reject them.

Mr. Nigel Forman: I am grateful for the opportunity to contribute briefly to this interesting debate. I have sat through virtually all the speeches and I have listened to them with considerable attention.
Speaking at this time of the evening, and looking at the open green Benches, reminds me of the old saying, "If you want to keep a secret, make a Back-Bench speech." There is no doubt that it is somewhat difficult to speak at this time of night.
I was going to make three main points, but I shall confine myself to one, for reasons of brevity. I wanted say some nice things about the growth of the economy, but those points have already been made adequately by my right hon. and hon. Friends. I shall content myself with making one practical suggestion by way of an early Budget representation to my right hon. and learned Friend the Chancellor and to his colleagues on the Treasury Bench.
One of the besetting difficulties in our economy since the war—perhaps for longer—has been the relatively low level, and sometimes also the poor quality, of the investment made in the economy. There has also been rather too low a level of aggregate savings which have been put aside by all sectors of the economy towards that investment. The time has come for the Government, and Parliament as a whole, to try to make a constructive contribution to rectifying that situation, or at any rate to lean against the national malaise of inadequate aggregate savings.
I shall quote one or two figures which relate to the time that the Government have been in office, from 1979 to the most recent available date. Total savings as a percentage of GDP moved from 23.1 per cent. in 1979 to 13.5 per cent. in 1993—a rather depressing decline.
If one looks, for example, at the international figures and compares our record with those of Japan and Germany, one finds that in roughly the same period—in this case, the figures relate to 1979 to 1992—Japan's gross national savings as a percentage of its GDP stayed roughly constant at 31.5 per cent. in 1979 and 33.9 per cent. in 1992. In


Germany, the figures were 22.8 per cent. in the first year and 22.7 per cent. in the second year. The United Kingdom's figures were 19 per cent. in the first year and 12.8 per cent. in the second year. I therefore want some measures to be taken not just in the forthcoming Budget but in succeeding ones to help to rectify that situation.
On the personal side, it is very important not to attack the tax regime for institutional savings, because we shall all need the efficiency and positive contribution made by such savings to thrive and grow in order to achieve the other objectives of Government policy in the sphere of occupational pensions. Rather, my right hon. and learned Friend would do well to consider introducing an overall tax incentive for any form of personal savings up to a maximum of, for example, £10,000 in a given tax year, which would be completely neutral as between one savings product and another. In the context of the move towards self-assessment, it could be self-certified by the taxpayer, subject to rigorous spot checks and fierce penalties from the Inland Revenue.
That should increase the aggregate level of personal savings in the economy, reduce the need for savings churning between different novelty products and encourage the old habit of direct equity or bond investments by individuals. If properly channelled by institutions and properly used by companies—obviously it is not just the quantity of investment, but the quality and the direction of it which matters—it should produce a higher level of overall investment in our economy.
If my colleagues on the Front Bench want to learn more about this idea—if they are not already up to speed on it —I commend to them a recent publication by the Institute for Fiscal Studies, which put forward an idea similar to the one that I have outlined. I believe that it would be in the national interest to pursue this idea.

Ms Harriet Harman: The argument in the debate centres on a fundamental difference of analysis of the state of the economy and a fundamental difference of view about the role of Government in the economy. The Opposition believe that the economy remains fundamentally weak and that the power of Government must be used to address that weakness. The Government tell us that the economy is doing just fine and that all they have to do is carry on as they are.
Rarely during an economic debate can such a contrast have been drawn between the picture that the Chancellor painted of the economic background and the daily reality that faces the people of Britain. Listening to Ministers today is like eavesdropping on the inhabitants of a different world.
The terms of the Government's motion celebrates their victory in the battle against unemployment, but in the real world, and according to the Government's own reckoning, the number of people in employment is actually falling, and still 2.6 million people remain unemployed.
The Chancellor tells us that we have an economic recovery that is the envy of Europe. Britain, of course, went earliest into recession and has, therefore, emerged before our competitors, but the effects of the recession have been far more severe here than those experienced elsewhere. That is why the OECD's forecast predicts that,

between 1990 and the end of 1995, the economy of Britain will grow at a slower rate than that of any other G7 country and at a slower rate than that of any other European Union country and that our economy will grow at less than half the average of those of OECD countries. That is why it is only in the make-believe world of Ministers that we are the envy of our competitors.
Ministers trumpet Britain's improved competitiveness, but the reality is that our trade deficit is the worst in the European Union and we are second from bottom in the OECD skills league table. That is the dream world in which Ministers are living—the dream world in which they can talk about tax cuts even as they impose the biggest tax rises in history and ordinary families face 10 more tax rises still to come. No wonder the Chancellor can detect no feel-good factor. People do not feel good about tax increases; they feel betrayed. They do not feel good about their employment prospects; they feel insecure. They do not feel good about economic recovery, because they do not believe it.
Moreover, people know that Britain's current economic weakness is reflected in a history of failures that stretches back to 1979 and embraces every aspect of economic performance. I am not talking the country down, but telling it straight. The Conservatives have failed on key tests set not by their opponents but by themselves.

Mr. Butterfill: If the hon. Lady does not believe the Government's statistics, she may believe those produced by the Library. Page 3 of the research paper that the Library produced for this debate shows the pattern for industrial production. Under the last Labour Government, industrial production fell rapidly between 1974 and 1976, and returned to its original level only in 1979 whereas, under this Government from 1980 to 1990, there was considerable recovery and we are now back to the record levels of 1990.

Ms Harman: The hon. Gentleman should look at what is happening in other countries. Manufacturing output in this country has grown by a mere 4 per cent. since 1979. Compare that with the record in America, where it has grown by 30 per cent. If the hon. Gentleman wants to take manufacturing output as an indicator, he should be extremely concerned about that fact.
The Conservatives have failed their own tests on borrowing, public spending and taxation. The story is one of ignominious retreat from their explicit promises.

Sir Peter Hordern: The hon. Lady specifically mentioned borrowing. Does she remember the great man, Dr. Johannes Witteveen, a director of the International Monetary Fund, who presided over the bailing out of the last Labour Government? I cannot remember the name of the gentleman who presided over the bailing out of the previous Labour Government. However, no Conservative Government have ever borrowed as much, as a proportion of GDP, as the last two Labour Governments. Labour Members are concerned only with increasing Government spending, which must have the same result.

Hon. Members: Hear, hear.

Ms Harman: Ministers say "Hear, hear", but the right hon. Gentleman is absolutely wrong. This Government have borrowed record amounts. Back in 1988, when the Prime Minister was Chief Secretary, he promised a zero


PSBR year on year. The people who promised to end borrowing altogether have now become the biggest Government borrowers in history and lamely propose that they may eliminate Government borrowing by the end of the century.
On public spending, which the right hon. Member for Horsham (Sir P. Hordern) also mentioned, the Government made two promises: to protect investment yet, at the same time, reduce overall public spending. But they have done neither. They have cut investment in the economy and public services, but failed to reduce overall spending.
The Government's most notorious and humiliating failure of all is on tax. People now pay more tax than they did in 1979. The Conservatives said nothing equivocal on tax in the general election campaign. They specifically promised income tax cuts. Moreover, they promised them year on year. They ruled out a rise in national insurance and promised not to put VAT on fuel. As we know, all those specific promises have been cynically broken. Now, the best that they can do is offer us, as the Chancellor has today, their instinct to cut tax. They are like a football team that promises to bring home the world cup and, having been humiliated in the qualifying round, comes home and tells the public about its instinct for scoring goals.
The Government's failure on the economy lies at the heart of all their other failures. My hon. Friend the Member for Monklands, East (Mrs. Liddell) addressed that failure in her maiden speech. She showed the strength of character and determination that will clearly make her an asset to her constituents. She spoke of her deference in following in John Smith's footsteps, and I am sure that the whole House will agree that he would have been proud of her speech.
For 15 years, the Tories have tried to present issues of spending, tax and borrowing in isolation from the state of the real economy, but the truth is that economic performance is crucial to performance on borrowing, on spending and on tax. That is why the Government have not succeeded, and will never succeed, even by their own standards.
It is the Government's failure on the economy which has sent the public sector borrowing requirement soaring to record levels. Economic failure has meant that the cost of keeping people unemployed has trebled, and the Government have responded by cutting investment. Economic failure means that, with more people unemployed, everyone has to pay more tax.
My right hon. Friend the Member for Chesterfield (Mr. Benn) asked exactly the right questions about tax. He said, "The question is, what is it for and who pays?" The answers, under the present Government, are, "What is it for? It is to pay the price of economic failure", and "Who pays? Middle and lower income families."
That record of failure obviously was not inevitable. It was not some unfortunate accident. It is the direct result, the product, of an economic dogma that simply has not worked—a dogma which says that the Government can play no positive role in the economy, and says that Britain can compete only as a low-wage, low-skill economy, with a weakened welfare state left to pick up the pieces.
That dogma stands condemned by the Tories' record of failure. It must be replaced by an approach that uses the power of Government to ensure investment for the future, which recognises that some markets need a regulatory framework that will foster economic success, and which has at its heart the commitment, which my hon. Friend the Member for Cambridge (Mrs. Campbell) mentioned, to a

high-tech, high-investment, high-skill, high-wage economy to give people economic opportunity, and a welfare state that gives people pathways out of poverty.
Some Ministers, including the Chancellor of the Exchequer, are trying to shift their ground, but remember, his is a party which said that unemployment is a price worth paying, and believed that manufacturing did not matter. My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) reminded the House, with the benefit of his experience, as he always does, that our economy has not prospered without a strong manufacturing base.
Have these Tories really changed? The answer is of course no, because although their words are changing, their actions are not. My hon. Friend the Member for Darlington (Mr. Milburn) made it clear that the Government still believe that unemployment has nothing to do with them, and that their rhetoric on full employment is meaningless.

Mr. Forman: I am grateful to the hon. Lady for giving way; she is very kind. Before she gets too carried away with Labour's prospect of spending its way out of recession, were it ever to be in government, does she recall the memorable words of Lord Callaghan, the last Labour Prime Minister—in perhaps every sense—who said to the Labour party conference in 1976:
I tell you in all candour, comrades, you cannot spend your way out of a recession"?
He was referring to public spending.

Ms Harman: The Government have failed to cut public spending, although they have cut investment, because they are spending more on the consequences of their economic failure. The history of the Tories' economic policy is failure destined to repeat itself, first as the tragedy of two recessions, followed by the farce of a Government trumpeting their success as they create the conditions for yet more failure.
For the Government, recovery is simply the absence of recession, but recovery, if it is to be sustained, must be more than that. They have not conquered the economic problems that they have created. They have not ended the pattern of boom and bust that my hon. Friend the Member for Coventry, North-West (Mr. Robinson) so excellently described. This fragile recovery is nothing more than an interval between the first two Tory recessions and the one that is yet to come.
Just as the Chancellor is trying to change the mood music on economic policy, so he has tried to change it on social policy. While the Chief Secretary still says that Government action undermines individual responsibihty, the Chancellor has started to speak about a strong welfare system.
The Chancellor has every reason to -be embarrassed by the Government's record on social policy. [HoN. MEMBERS: "Why"?] Conservative Members should look at the Government's own figures, which show that since 1979 the income of the poorest one tenth of the population, in real terms, has actually fallen by 17 per cent. while that of the richest has increased by 62 per cent. That is the direct result of an economic strategy based fairly and squarely on high unemployment and low wages. It is the direct result of a tax policy based on tax loopholes for the super-rich and tax increases for low-paid and middle-income families. It is the direct result of a social policy based on cutting benefits.
Just as the Government's economic strategy remains unchanged so, too, their tax and social policies remain


unchanged. It was the Chancellor who insisted on going ahead with VAT on fuel—and still, despite the outcry in the country and despite its obvious unfairness, he refuses to cancel the increase from 8 to 17.5 per cent. He still refuses to end the tax privileges for the rich, such as executive share option schemes that give the richest people thousands of pounds in untaxed income. Meanwhile, the Government's policy of punishing the poor remains unchanged, cutting invalidity benefit and unemployment benefit—and now housing benefit is also on the hit list.
At the heart of Tory economic policy has been the commitment to cut public spending and we heard much about that in the debate. In 1979, the Conservative manifesto asserted:
The state takes too much of the nation's income: its share must be steadily reduced.
The Government have not done that. Public spending is 44 per cent. of gross domestic product now and it was 44 per cent. of GDP in 1979. It is no lower now than it was when the Tories took office in 1979. That is not because they have been investing in a stronger economy; it is not because they have been modernising the health service or giving us a state-of-the-art transportation system—far from it.
The Tories are not spending less as a percentage of GDP, but what they have done is to change the composition of public spending. More is being spent on the costs of economic failure and less on investing for economic opportunity and success. They pay out income support for the growing number of single parents instead of ensuring the provision of nursery places so that they can go out to work. They pay out unemployment benefit to the unemployed instead of ensuring investment in skills to help them to get a job.
In the face of the Government's inability successfully to manage the economy, Tory public spending, instead of being a springboard for economic success, has become increasingly a palliative for economic failure. It is not that this Tory Government have been short of public money to spend. They have had £118 billion of North sea oil receipts and they have squandered it. They have had £69 billion of privatisation receipts and they have squandered it.

Mr. Butterfill: Will the hon. Lady give way?

Ms Harman: I have already given way to the hon. Gentleman once and I will not do so again.
The Government have lacked not public money, but an understanding of how to use it in the public interest. People are paying tax increases not to invest in success in the future but to pay the price of the Government's past failure. The truth is that the Tories are no more the party of low public spending than they are the party of low tax. Everywhere they turn, they are confronted with the consequences of their failure and their inability to deal with that.
At this time of crisis for them, the message goes forth from Tory central office, "Fellow Conservatives. Ask not what can you do for your country. Ask who in the country you can blame." So they target the victims of their policies. Unemployment, homelessness and poverty, which the Government created, are the fault of the unemployed, the homeless and the poor. Insidiously, they invite the voters, the general public, to blame those groups, to divert anger away from the Government.
The Chief Secretary, however, goes one step further. He does not simply blame the victims for the public dissatisfaction with the Government. He goes beyond the middlemen. He blames the voters themselves. As he put it in a recent interview, the reason why the Tories now trail Labour on tax among the electorate is because
their judgment has become clouded".
Britain is plagued by a muddled electorate—it is their confusion which is responsible for the Government's unpopularity. At this point, I know that some of my hon. Friends will suggest that the confusion lies not with the electorate but in the Chief Secretary's own head. Undaunted, however, he comes back with more revealing insights.
The voters, he says, are flawed in other ways, too. They are not merely confused. They have also become cynical. According to the Chief Secretary's preachings, voters no longer
respect those who lead and manage them.
Then, last month, from his speech in Spain, we learned that the voices in his head told him that he must speak out again, this time about a great threat to democracy. Apparently—I shall translate, because by this time he was speaking in tongues—
Voters feel they own their government, and since they feel they own it, they believe it should do what they want.
In common with the people who walk up and down Oxford street with sandwich boards on their backs proclaiming, "The end is nigh" or that "Protein is the root of all evil" the Chief Secretary believes, I am sure, that the world will one day wake up to his perspective.
But perhaps it is not fair to single out the Chief Secretary, because there are other forms of delusion equally worthy of our attention. Everyone knows, for example, about the worrying influence of computer games and the consequent blurring of fantasy and reality. But an even more ominous phenomenon is emerging—virtual reality headsets. One just puts one on and enters a fantasy world where one can make anything happen.
So now we know why Ministers are so removed from the real world. They sit around the Cabinet table every Thursday morning, and when talk of traffic cones and service station toilets fails to distract them from the mountains of problems that are too painful to be faced, they get out their headsets and enter a world of their own creation. They press their control pads and the unemployed are made to disappear. At the touch of a button, our ailing economy rematerialises—this time as the envy of the world. With a deft swivel of their joy sticks, the law of gravity is reversed and taxes appear to be falling, even as they are soaring upwards.
But the problem for Ministers is that no one else lives in virtual reality. Everyone else lives in the real world: the world of falling living standards, economic failure, social division and rising taxes. [Interruption.] I see that a Conservative Member has such a headset on even now. People bitterly resent a Government who say that everything is fine when, clearly, it is not.
This summer economic debate comes at the end of an historic parliamentary Session. The Government have been exposed on their tax record, exposed for their deceit on tax, exposed for their unfairness on tax and exposed as the perpetrators of the biggest tax rise in history. The Tory's last remaining electoral weapon—the myth of low tax—


has been taken from them. They failed on economic policy and social policy. Despite their pretence that everything is fine, they know that they have failed.
That is why some of them are tentatively moving on to Labour's ground. [HoN. MEMBERS: "No."] Yes, they are: all this talk about full employment—not in here, but out there—and about community. But Labour's language will not work for the Tories. Bear that in mind. It will not work because people who are worried about unemployment will not look to the party that has created mass unemployment. People who care about modernising the welfare state will not look to a party that has undermined it. People who want a strong economy will not look to a party that has weakened it.
People have made it clear in local council elections and European elections that they no longer trust the Tories. There has been an historic shift in the allegiance of the British people. They are now ready to entrust their future to Labour.

The Chief Secretary to the Treasury (Mr. Michael Portillo): My right hon. Friend the Member for Worthing (Sir Terence Higgins) and the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) complained that there were too few opportunities to discuss the economy. During the course of the afternoon we have heard a series of interesting speeches on the economy from my right hon. and hon. Friends and, indeed, from some Opposition Members.
Unfortunately, we did not hear any explanation from the Labour Front-Bench spokesmen of what the Labour party's economic policies might be. For the hon. Member for Peckham (Ms Harman), in the dying moments of her speech just before it fizzled out, to talk about the Conservatives wanting to move on to Labour's ground, when it was perfectly clear from the whole debate that there was no ground to move on to, really took the biscuit.
I pay tribute to one speech from the Labour side. The hon. Member for Monklands, East (Mrs. Liddell) made her maiden speech. It was a speech full of personal modesty. The House will have appreciated the tribute that she paid to her predecessor, John Smith. It was a speech of substantial eloquence and she showed her keenness to serve her constituents. I wish her well with her parliamentary career.
The hon. Member for Monklands, East paid a great deal of attention to the need to create jobs in her constituency. She put particular emphasis on the need for small businesses to develop in her constituency and to do well. I would say to her that for that to be the case, there has to be confidence, and confidence is what the Government have been restoring by their economic policies.
I want to make a speech to close the debate which is about principles, specific policies, achievements and a programme to make sure that our economy is strong and that there can be confidence in that economy. I shall contrast our approach at every step with the lack of policy from the Labour party.
I wish to detail the steps that my right hon. and learned Friend the Chancellor and I have worked at to restore confidence in British economic management. We have done it under the headings of monetary policy, public spending and fiscal policy. I want to talk about all three.

Mr. Butterfill: Will my right hon. Friend confirm that one of the things that the hon. Member for Peckham (Ms Harman) said was factually incorrect according to the information from the Library? She said that the Organisation for Economic Co-operation and Development forecasters had said that our growth would be lower than that of other countries. The Library research paper shows on page 19 that our growth will be higher than almost any other OECD country in terms of GDP for both the present year and 1995. Can my right hon. Friend confirm that that is correct?

Mr. Portillo: My hon. Friend is right. The prospects are that we shall have the highest growth rate of any major European Union country this year and next.

Mr. Allan Rogers: Will the right hon. Gentleman give way?

Mr. Portillo: No. I want to get on.
The reason why we have a monetary policy is that we believe that the basis of economic confidence and stability must be low and sustained low inflation. We believe that it is essential for social cohesion that there should be low inflation. That is why we have set specific targets which say that the underlying rate of inflation will be kept between 1 and 4 per cent. and that we will be in the lower half of that range at the end of this Parliament.
That is why we have laid out the other factors that we shall bear in mind in judging whether monetary conditions are right or whether they need to be tightened or loosened. We have referred to asset prices, to monitoring the money supply and exchange rate, and to watching a range of other factors to identify inflationary pressures. We want to make it clear that interest rates in this country will be set according to economic conditions in this country and not according to economic conditions in other countries. We want to make it clear that interest rates will be set in this country for economic reasons and not for political reasons.
That is why we have embarked on making our monetary policy ever more transparent, publishing the monthly monetary report, setting up the independent panel of forecasters, publishing the minutes of meetings between my right hon. and learned Friend the Chancellor of the Exchequer and the Governor of the Bank of England when they discuss monetary policy. That is why the OECD has paid tribute to the steps that we have taken to establish that monetary policy framework and has described the publication of the minutes as a significant step forward.
That is why my hon. Friends the Members for Canterbury (Mr. Brazier) and for Croydon, South (Mr. Ottaway) made such a point of referring to the importance of low inflation.

Mr. Rogers: Will the Minister give way?

Mr. Portillo: No, I am sorry, but the hon. Gentleman has not been here for the debate.
The second heading under which I want to deal with our policies for creating confidence is public spending. We believe that the Government's control of their spending is critical to confidence in that Government. One cannot have confidence in a Government unless they are able to control their spending.
Conservative Members believe strongly that the Government and the state are there to serve the individual and that it should not be the other way around. That is why we believe that a Government who are spending 45 per


cent. of gross domestic product need to reduce that proportion progressively year by year. We believe that the citizen is the customer of the Government and that he must be given good services and good value for money. We recognise that taxpayers, whose money the Labour party would spend with such alacrity, are not well off and may be much less well off than the people to whom the money is being given, which has been removed from taxpayers.
We believe that controlling public spending is vital for the competitiveness of this country. Although the Government are spending about 45 per cent. of our national income, the Governments of the great competitors—the United States of America and Japan—are spending no more than about a third of their national incomes. That is why we have embarked on a process for the complete control of public spending. That is why, despite the comments by my hon. Friend the Member for Bridlington (Mr. Townend), I believe that we have achieved considerable successes.
In the Budget, my right hon. and learned Friend the Chancellor was able to announce that the plans for this year had been reduced by £3.5 billion. That came on top of the reduction in the previous autumn statement and it means that the plans for this year are £8.25 billion below the level at which they were set in the 1991 public expenditure survey. We have taken £15 billion off the plans for the three years of the public expenditure survey.
I have set out the Government's belief in low inflation. I have set out our monetary targets. I have set out our inflation targets. I have set out achievements in public spending. I would like to know from the Labour party whether it believes that inflation should be higher. Does it believe that the monetary targets are wrong? Does it believe that we are following the wrong inflation indicators? Does it believe that publication of the minutes of meetings between the Governor of the Bank of England and my right hon. and learned Friend the Chancellor should not be published? Does it believe that public spending is too high? Does it believe that it is too low? Will the Labour party please tell us what its principles are?
I can tell the House specifically what our principles, our goals and our achievements are. That is why I say to my hon. Friends who are concerned about the level of public spending that they should remember that we are planning for a rate of growth of only 0.25 per cent. per year in real terms for the three years of the public expenditure survey.
We have been able to find, however, more money for health, more money for education and more money for pensioners. That is because the Government have, as my hon. Friends, including my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg) have been urging us to do, controlled the growth of the social security budget and turned our attention in particular to social security fraud. It is because we have reformed the social security system to ensure that it is better targeted, because we have put great emphasis on increased efficiency in public services and because we have tightly controlled our own costs in government that we shall reduce the proportion of national income taken by the Government to 42.5 per cent.

Mr. David Shaw: rose—

Mr. Portillo: My hon. Friend has not been here, but I shall give way to him.

Mr. Shaw: I am grateful to my right hon. Friend for giving way. Does he agree that public expenditure control is paramount and that when decisions are taken in government, such as to remove the Royal Marines school of music from Deal, a proper investment appraisal should always be undertaken first? Does he agree?

Mr. Portillo: Of course a proper appraisal should be made. If my hon. Friend has any point to pursue about that, he should do so with my right hon. and learned Friend the Secretary of State for Defence.

Mr. George Howarth: Will the right hon. Gentleman give way?

Mr. Portillo: No; the hon. Gentleman has not been here.

Ms Harman: Before the right hon. Gentleman leaves the point about public spending, will he explain why in 1979 public spending as a percentage of GDP was 44 per cent. and yet, after 15 years of Tory government, it is still 44 per cent. of GDP? Can he explain that to his colleagues?

Mr. Portillo: The hon. Lady should be ashamed to remind the House that she offered us 44 per cent. as a proportion of national income at a time when the economy was in recovery, at the end of a boom period. We are at 44 per cent. following a recession. The average figure under the Labour party was 46.5 per cent. During the 1980s, when we had a period of strong recovery for a number of years, we got it down to 38 per cent. Would the hon. Lady now like to commit herself to getting it down to 38 per cent., or to any figure at all? Is she saying that 44 per cent. is too high, or that, as it was the figure under Labour, it is the figure that she supports? I am prepared to tell her that I think that the figure is too high, and we are determined to reduce it. What is her policy, please?

Ms Harman: Too much public expenditure in this country goes on mopping up the consequences of this Government's economic failure. We see spending on unemployment, on poverty—on income support—and on housing benefit because of their failures on economic policy and their failure in housing policy. We see investment being cut. Is that the pattern of public spending that the right hon. Gentleman expects us to applaud as a success? I think not.

Mr. Portillo: If the hon. Lady believes that unemployment is too high and if, as I understand it, she is saying that she would cut unemployment and that that would solve all her problems, why is it that a country like France, which has a minimum wage—the policy that she advocates—has a rate of unemployment higher than Britain's? Why is it that Sweden, which spends 72 per cent. of national income through government—a country that follows the policies advocated by the right hon. Member for Chesterfield (Mr. Benn)— has a high rate of unemployment? Why is it that Spain, which has a socialist government, has a rate of unemployment of 25 per cent. and a rate of youth unemployment of 40 per cent.? I will tell her why. It is because Spain has had 10 years of socialist government, and the only reason why there is any hope for the people of Spain is that the leader of the Spanish Opposition is charismatic, is 41 years old, was born in 1953 and is a Conservative.
I now want to deal with fiscal policy. We believe in controlling the rate of Government borrowing because we


are aware that the borrowing that we pass on from this Parliament is a burden that must be paid for by our children. That could lead to permanently higher rates of taxation or fewer choices for our people. We have taken decisive action—more decisive action than, I believe, any other Government, to control our rate of public borrowing.
As a consequence, the PSBR as a proportion of our national income will reduce from 7.25 per cent. last year to 5.25 per cent. this year and to 4 per cent. next year.
Most importantly, the ratio of the debt that we have accumulated over the years to our GDP will not pass 50 per cent. whereas in Greece it is now 104 per cent., in Italy it is 116 per cent. and in Belgium it is 145 per cent. The only EC country which has a lower ratio of debt to GDP than we have is Luxembourg. That point may be of interest to my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) who was interested in the appointment of Mr. Santer.
All the policies that I have described, policies which are backed by principles and which are very clear, have been endorsed recently by the Organisation for Economic Co-operation and Development. In its voluminous report, one policy after another followed by this Conservative Government has been vindicated, upheld, praised and underpinned by the OECD.
We remember perfectly well that, under the Labour Government, the British economy was run by the International Monetary Fund. Under this Conservative Government, the economy and its economic management are praised by the OECD. That is the difference between the two.
We now have the fastest rise in retail sales of any major European Union country. We have the fastest rate of growth of GDP of any major European Union country. We have the fastest growth in industrial production of any major European Union country.
In the European Union this year, only in this country is unemployment falling. Inflation is below the European Union average. Interest rates are among the lowest in the European Union. Manufacturing output is up 3.2 per cent. this year, car production is up 3 per cent. and export volumes are up 9 per cent.
I can tell the hon. Member for Peckham (Ms Harman) that there is no fantasy in all that. They are solid achievements brought about by sound economic policies. They are solid achievements which could be brought. about only by a Government who have principles and the courage to stick to those principles and the policies that are derived from those principles.
We have established the stable economic conditions and the conditions of low inflation that enable unemployment to be reduced and employment to be increased. Over the years, we have shown the courage to tackle the vested interests, including the trade unions, in order to create flexible labour markets.
Against what the hon. Member for Dunfermline, East (Mr. Brown) said, the winter labour force survey shows that there are 150,000 more jobs in the United Kingdom than there were a year ago and that the number of people in employment is rising. He knows perfectly well that the proportion of our working age population in work is now the highest of any major European Union country. Those are facts to which the hon. Members for Dunfermline, East and for Peckham should pay tribute. If they cannot do that, at least they should say what their policies are.
My hon. Friend the Member for Sevenoaks (Mr. Wolfson) described the speech of the hon. Member for Dunfermline, East as disappointing. I believe that it was closer to being disgraceful. I read in The Daily Telegraph this morning a comment of Mrs. Blair. She was paying tribute to her husband, the hon. Member for Sedgefield (Mr. Blair) and, in paying tribute to her husband, she said that he was able to cook, change nappies and discuss economic policy over the telephone with the hon. Member for Dunfermline, East all at the same time.
Having listened to the hon. Member for Dunfermline, East today, and on the principle that it is garbage in, garbage out, it seems to me that the cooking, the nappies and the economic policy somehow were confused during the course of the hon. Gentleman's speech. His speech today was characterised by a refusal to answer questions and by a reversion to platitudes. I put it to the hon. Gentleman that it is not fair and it is not honest with the people of this country to try to fool them about serious matters such as unemployment and economic recovery.
The new leader of the Labour party would be proud of the hon. Member for Dunfermline, East. His speech today was vacuous and fatuous. It was airy-headed, it was full of guff, and it was full of blah. Labour Members are about to elect a leader of the Labour party whose very name is a combination of blah and of air. It was a disingenuous, deceitful and dishonest speech. It was half-thought out, half-baked and less than half true. All the way through the hon. Gentleman's speech there was the hint of a planned economy re-emerging.
The electorate know that the only way that more jobs will be created is by having stable economic conditions and low inflation. That is what we have created. The people of this country know that the only way in which more jobs will be created is the way that has been followed around the world.
Over the past 10 years, 1.5 billion people have gone from dictatorship to democracy. All around the world, people see the strong connection between political freedom and economic freedom. All countries that have recently achieved political freedom are now following a policy of flexible labour markets, low tariffs, deregulation, privatisation and competition—all the policies which are espoused by the Government. It cannot be that only in Britain and only in Europe should those policies be tossed aside. The Government will follow those policies and carry them to fruition.
The leadership contest in the Labour party has been characterised by sound bites and hooey, signifying nothing. The Labour party contest has been a no-score game which has had to be settled on penalties. The hon. Member for Kingston upon Hull, East (Mr. Prescott) and the right hon. Member for Derby, South (Mrs. Beckett) have had to pay the penalty. The hon. Member for Kingston upon Hull, East once admitted that the social chapter would destroy jobs. He has paid the penalty for having sometimes been right, and the right hon. Member for Derby, South has paid the penalty for having sometimes been left.
As always, when games are settled by penalties, people are left feeling that they have been cheated, and the people who have been cheated in this instance are the British public. The British public want to hear from the Labour party a serious exposition of an alternative economic policy. [Interruption.] Labour Members have had all afternoon to do that, but they have put forward not one


serious idea. [Interruption.] I tell Labour Members frankly that they will not be able to go from now until the general election without answering the serious questions that arise. [Interruption.]

Sir Cranley Onslow: On a point of order, Madam Speaker.

Mr. Portillo: Labour Members will not be able to reply to every question by referring to—

Madam Speaker: Order. I have a point of order.

Sir Cranley Onslow: You must be aware, Madam Speaker, that it has become extremely difficult for right hon. and hon. Members to hear the debate because of the noise that is coming from the Opposition. Will you persuade the House to be quieter?

Madam Speaker: I have speakers beside me, so the debate is very clear for me, but I wish that the House would come to order so that we might hear the final two minutes of the winding-up speech.

Mr. Portillo: It will not be sufficient for the hon. Member for Dunfermline, East to reply to every question between now and the general election by referring to what people said in their election addresses. One cannot smile one's way to an economic policy, one cannot grin one's way to competitiveness, and one cannot build a stronger economy out of platitudes. No—one needs principles, convictions, policies, determination and courage. The Labour party has none of those. We demonstrate every day that we have those qualities, and that is why the British people will place their confidence in us.

Question put, That the amendment be made:—

The House divided: Ayes 261, Noes 302.

Division No. 297]
[9.59 pm


AYES


Abbott, Ms Diane
Byers, Stephen


Adams, Mrs Irene
Caborn, Richard


Allen, Graham
Callaghan, Jim


Alton, David
Campbell, Mrs Anne (C'bridge)


Anderson, Donald (Swansea E)
Campbell, Menzies (Fife NE)


Anderson, Ms Janet (Ros'dale)
Campbell, Ronnie (Blyth V)


Armstrong, Hilary
Campbell-Savours, D. N.


Ashdown, Rt Hon Paddy
Canavan, Dennis


Ashton, Joe
Cann, Jamie


Austin-Walker, John
Carlile, Alexander (Montgomry)


Banks, Tony (Newham NW)
Chidgey, David


Barnes, Harry
Chisholm, Malcolm


Barron, Kevin
Church, Judith


Battle, John
Clapham, Michael


Beckett, Rt Hon Margaret
Clark, Dr David (South Shields)


Beith, Rt Hon A. J.
Clarke, Eric (Midlothian)


Bell, Stuart
Clarke, Tom (Monklands W)


Benn, Rt Hon Tony
Clelland, David


Bennett, Andrew F.
Clwyd, Mrs Ann


Benton, Joe
Coffey, Ann


Bermingham, Gerald
Cohen, Harry


Berry, Roger
Connarty, Michael


Betts, Clive
Cook, Robin (Livingston)


Blair, Tony
Corbett, Robin


Blunkett, David
Corbyn, Jeremy


Boyes, Roland
Corston, Ms Jean


Bradley, Keith
Cousins, Jim


Bray, Dr Jeremy
Cox, Tom


Brown, Gordon (Dunfermline E)
Cummings, John


Brown, N. (N'c'tle upon Tyne E)
Cunliffe, Lawrence


Bruce, Malcolm (Gordon)
Cunningham, Jim (Covy SE)


Burden, Richard
Cunningham, Rt Hon Dr John





Dalyell, Tam
Kirkwood, Archy


Darling, Alistair
Lestor, Joan (Eccles)


Davidson, Ian
Lewis, Terry


Davies, Bryan (Oldham C'tral)
Liddell, Helen


Davies, Rt Hon Denzil (Llanelli)
Livingstone, Ken


Davis, Terry (B'ham, H'dge H'I)
Lloyd, Tony (Stretford)


Denham, John
Llwyd, Elfyn


Dewar, Donald
Lynne, Ms Liz


Dixon, Don
McAllion, John


Dobson, Frank
McAvoy, Thomas


Donohoe, Brian H.
McCartney, Ian


Dowd, Jim
Macdonald, Calum


Dunwoody, Mrs Gwyneth
McFall, John


Eastham, Ken
McKelvey, William


Enright, Derek
Mackinlay, Andrew


Etherington, Bill
McLeish, Henry


Evans, John (St Helens N)
McMaster, Gordon


Ewing, Mrs Margaret
McNamara, Kevin


Fatchett, Derek
MacShane, Denis


Faulds, Andrew
McWilliam, John


Field, Frank (Birkenhead)
Madden, Max


Fisher, Mark
Maddock, Mrs Diana


Flynn, Paul
Mahon, Alice


Foster, Rt Hon Derek
Mandelson, Peter


Foster, Don (Bath)
Marek, Dr John


Foulkes, George
Martin, Michael J. (Springburn)


Fraser, John
Martlew, Eric


Fyfe, Maria
Maxton, John


Galloway, George
Meacher, Michael


Gapes, Mike
Michael, Alun


Garrett, John
Michie, Bill (Sheffield Heeley)


Gerrard, Neil
Michie, Mrs Ray (Argyll Bute)


Gilbert, Rt Hon Dr John
Milburn, Alan


Godman, Dr Norman A.
Miller, Andrew


Godsiff, Roger
Mitchell, Austin (Gt Grimsby)


Golding, Mrs Llin
Morgan, Rhodri


Gordon, Mildred
Morley, Elliot


Grant, Bernie (Tottenham)
Morris, Rt Hon A. (Wy'nshawe)


Griffiths, Nigel (Edinburgh S)
Morris, Estelle (B'ham Yardley)


Griffiths, Win (Bridgend)
Morris, Rt Hon J. (Aberavon)


Grocott, Bruce
Mowlam, Marjorie


Gunnell, John
Mudie, George


Hain, Peter
Mullin, Chris


Hall, Mike
Oakes, Rt Hon Gordon


Hanson, David
O'Brien, Michael (N W'kshire)


Hardy, Peter
O'Brien, William (Normanton)


Harman, Ms Harriet
O'Hara, Edward


Harvey, Nick
O'Neill, Martin


Hattersley, Rt Hon Roy
Orme, Rt Hon Stanley


Hendron, Dr Joe
Parry, Robert


Heppell, John
Patchett, Terry


Hill, Keith (Streatham)
Pendry, Tom


Hinchliffe, David
Pickthall, Colin


Hodge, Margaret
Pike, Peter L.


Hoey, Kate
Pope, Greg


Hogg, Norman (Cumbernauld)
Powell, Ray (Ogmore)


Hood, Jimmy
Prentice, Ms Bridget (Lew'm E)


Hoon, Geoffrey
Prentice, Gordon (Pendle)


Howarth, George (Knowsley N)
Prescott, John


Hoyle, Doug
Primarolo, Dawn


Hughes, Kevin (Doncaster N)
Purchase, Ken


Hughes, Robert (Aberdeen N)
Quin, Ms Joyce


Hughes, Simon (Southwark)
Radice, Giles


Hutton, John
Randall, Stuart


Illsley, Eric
Raynsford, Nick


Ingram, Adam
Redmond, Martin


Jackson, Glenda (H'stead)
Rendel, David


Jackson, Helen (Shef'ld, H)
Robertson, George (Hamilton)


Jamieson, David
Robinson, Geoffrey (Co'try NW)


Johnston, Sir Russell
Roche, Mrs. Barbara


Jones, Barry (Alyn and D'side)
Rogers, Allan


Jones, Lynne (B'ham S O)
Rooker, Jeff


Jones, Martyn (Clwyd, SW)
Rooney, Terry


Jones, Nigel (Cheltenham)
Ross, Ernie (Dundee W)


Jowell, Tessa
Rowlands, Ted


Keen, Alan
Ruddock, Joan


Kennedy, Charles (Ross.C&amp;S)
Salmond, Alex


Kennedy, Jane (Lpool Brdgn)
Sedgemore, Brian


Khabra, Piara S.
Sheldon, Rt Hon Robert


Kilfoyle, Peter
Shore, Rt Hon Peter






Short, Clare
Tyler, Paul


Simpson, Alan
Vaz, Keith


Skinner, Dennis
Walker, Rt Hon Sir Harold


Smith, Andrew (Oxford E)
Walley, Joan


Smith, C. (Isl'ton S &amp; F'sbury)
Wardell, Gareth (Gower)


Smith, Llew (Blaenau Gwent)
Wareing, Robert N


Snape, Peter
Watson, Mike


Soley, Clive
Wicks, Malcolm


Spearing, Nigel
Williams, Rt Hon Alan (Sw'n W)


Spellar, John
Williams, Alan W (Carmarthen)


Squire, Rachel (Dunfermline W)
Winnick, David


Steel, Rt Hon Sir David
Wise, Audrey


Steinberg, Gerry
Worthington, Tony


Stevenson, George
Wray, Jimmy


Strang, Dr. Gavin
Wright, Dr Tony


Straw, Jack
Young, David (Bolton SE)


Sutcliffe, Gerry



Taylor, Mrs Ann (Dewsbury)
Tellers for the Ayes:


Thompson, Jack (Wansbeck)
Mr. Jon Owen Jones and Mr. Dennis Turner.


Timms, Stephen



Tipping, Paddy





NOES


Ainsworth, Peter (East Surrey)
Couchman, James


Aitken, Jonathan
Cran, James


Alison, Rt Hon Michael (Selby)
Currie, Mrs Edwina (S D'by'ire)


Allason, Rupert (Torbay)
Curry, David (Skipton &amp; Ripon)


Amess, David
Davies, Quentin (Stamford)


Ancram, Michael
Davis, David (Boothferry)


Arbuthnot, James
Day, Stephen


Arnold, Jacques (Gravesham)
Deva, Nirj Joseph


Arnold, Sir Thomas (Hazel Grv)
Devlin, Tim


Ashby, David
Dickens, Geoffrey


Aspinwall, Jack
Dorrell, Stephen


Atkins, Robert
Douglas-Hamilton, Lord James


Atkinson, Peter (Hexham)
Dover, Den


Baker, Nicholas (Dorset North)
Duncan, Alan


Baldry, Tony
Duncan-Smith, Iain


Banks, Matthew (Southport)
Dunn, Bob


Banks, Robert (Harrogate)
Durant, Sir Anthony


Bates, Michael
Dykes, Hugh


Batiste, Spencer
Eggar, Tim


Bellingham, Henry
Elletson, Harold


Bendall, Vivian
Emery, Rt Hon Sir Peter


Beresford, Sir Paul
Evans, David (Welwyn Hatfield)


Biffen, Rt Hon John
Evans, Jonathan (Brecon)


Blackburn, Dr John G.
Evans, Nigel (Ribble Valley)


Body, Sir Richard
Evans, Roger (Monmouth)


Booth, Hartley
Evennett, David


Bottomley, Peter (Eltham)
Faber, David


Bottomley, Rt Hon Virginia
Fabricant, Michael


Bowis, John
Fenner, Dame Peggy


Boyson, Rt Hon Sir Rhodes
Field, Barry (Isle of Wight)


Brandreth, Gyles
Fishburn, Dudley


Brazier, Julian
Forman, Nigel


Blight, Graham
Forsyth, Michael (Stirling)


Brooke, Rt Hon Peter
Forth, Eric


Brown, M. (Brigg &amp; Cl'thorpes)
Fowler, Rt Hon Sir Norman


Browning, Mrs. Angela
Fox, Dr Liam (Woodspring)


Budgen, Nicholas
Fox, Sir Marcus (Shipley)


Burns, Simon
Freeman, Rt Hon Roger


Burt, Alistair
French, Douglas


Butcher, John
Fry, Sir Peter


Buttertill, John
Gale, Roger


Carlisle, John (Luton North)
Gallie, Phil


Carlisle, Sir Kenneth (Lincoln)
Gardiner, Sir George


Carrington, Matthew
Garel-Jones, Rt Hon Tristan


Carttiss, Michael
Garnier, Edward


Cash, William
Gill, Christopher


Channon, Rt Hon Paul
Goodson-Wickes, Dr Charles


Clappison, James
Gorman, Mrs Teresa


Clark, Dr Michael (Rochford)
Gorst, Sir John


Clarke, Rt Hon Kenneth (Ruclif)
Grant, Sir A. (Cambs SW)


Clifton-Brown, Geoffrey
Greenway, Harry (Ealing N)


Coe, Sebastian
Greenway, John (Ryedale)


Congdon, David
Griffiths, Peter (Portsmouth, N)


Conway, Derek
Grylls, Sir Michael


Coombs, Anthony (Wyre For'st)
Gummer, Rt Hon John Selwyn


Cope, Rt Hon Sir John
Hague, William


Cormack, Patrick
Hamilton, Rt Hon Sir Archie





Hamilton, Neil (Tatton)
Mitchell, Sir David (Hants NW)


Hampson, Dr Keith
Moate, Sir Roger


Hanley, Jeremy
Molyneaux, Rt Hon James


Hannam, Sir John
Monro, Sir Hector


Hargreaves, Andrew
Montgomery, Sir Fergus


Harris, David
Moss, Malcolm


Haselhurst, Alan
Nelson, Anthony


Hawkins, Nick
Neubert, Sir Michael


Hawksley, Warren
Newton, Rt Hon Tony


Hayes, Jerry
Nicholls, Patrick


Heald, Oliver
Nicholson, David (Taunton)


Heath, Rt Hon Sir Edward
Nicholson, Emma (Devon West)


Heathcoat-Amory, David
Norris, Steve


Hendry, Charles
Onslow, Rt Hon Sir Cranley


Hicks, Robert
Oppenheim, Phillip


Higgins, Rt Hon Sir Terence L.
Ottaway, Richard


Hill, James (Southampton Test)
Page, Richard


Horam, John
Paice, James


Hordem, Rt Hon Sir Peter
Patnick, Irvine


Howard, Rt Hon Michael
Patten, Rt Hon John


Howarth, Alan (Strat'rd-on-A)
Pattie, Rt Hon Sir Geoffrey


Howell, Rt Hon David (G'dford)
Pawsey, James


Howell, Sir Ralph (N Norfolk)
Peacock, Mrs Elizabeth


Hughes Robert G. (Harrow W)
Pickles, Eric


Hunt, Rt Hon David (Wirral W)
Porter, David (Waveney)


Hunt, Sir John (Ravensbourne)
Portillo, Rt Hon Michael


Hunter, Andrew
Powell, William (Corby)


Hurd, Rt Hon Douglas
Rathbone, Tim


Jack, Michael
Redwood, Rt Hon John


Jenkin, Bernard
Ronton, Rt Hon Tim


Jessel, Toby
Richards, Rod


Johnson Smith, Sir Geoffrey
Riddick, Graham


Jones, Gwilym (Cardiff N)
Rifkind, Rt Hon. Malcolm


Jones, Robert B. (W Hertfdshr)
Robathan, Andrew


Jopling, Rt Hon Michael
Roberts, Rt Hon Sir Wyn


Kellett-Bowman, Dame Elaine
Robertson, Raymond (Ab'd'n S)


Key, Robert
Robinson, Mark (Somerton)


Kilfedder, Sir James
Roe, Mrs Marion (Broxbourne)


King, Rt Hon Tom
Rowe, Andrew (Mid Kent)


Kirkhope, Timothy
Rumbold, Rt Hon Dame Angela


Knapman, Roger
Ryder, Rt Hon Richard


Knight, Mrs Angela (Erewash)
Sackville, Tom


Knight, Greg (Derby N)
Sainsbury, Rt Hon Tim


Knight, Dame Jill (Bir'm E'st'n)
Scott, Rt Hon Nicholas


Knox, Sir David
Shaw, David (Dover)


Kynoch, George (Kincardine)
Shaw, Sir Giles (Pudsey)


Lait, Mrs Jacqui
Shepherd, Colin (Hereford)


Lamont, Rt Hon Norman
Shepherd, Richard (Aldridge)


Lang, Rt Hon Ian
Shersby, Michael


Lawrence, Sir Ivan
Sims, Roger


Legg, Barry
Skeet, Sir Trevor


Leigh, Edward
Smith, Tim (Beaconsfield)


Lennox-Boyd, Mark
Soames, Nicholas


Lester, Jim (Broxtowe)
Speed, Sir Keith


Lidington, David
Spencer, Sir Derek


Lilley, Rt Hon Peter
Spicer, Sir James (W Dorset)


Lloyd, Rt Hon Peter (Fareham)
Spicer, Michael (S Worcs)


Lord, Michael
Spink, Dr Robert


Luff, Peter
Spring, Richard


Lyell, Rt Hon Sir Nicholas
Sproat, Iain


MacGregor, Rt Hon John
Squire, Robin (Hornchurch)


MacKay, Andrew
Stanley, Rt Hon Sir John


Maclean, David
Steen, Anthony


McLoughlin, Patrick
Stephen, Michael


McNair-Wilson, Sir Patrick
Stem, Michael


Madel, Sir David
Stewart, Allan


Maginnis, Ken
Streeter, Gary


Maitland, Lady Olga
Sumberg, David


Malone, Gerald
Sweeney, Walter


Mans, Keith
Sykes, John


Marland, Paul
Tapsell, Sir Peter


Martow, Tony
Taylor, Ian (Esher)


Marshall, John (Hendon S)
Taylor, John M. (Solihull)


Marshall, Sir Michael (Arundel)
Taylor, Sir Teddy (Southend, E)


Martin, David (Portsmouth S)
Temple-Morris, Peter


Mates, Michael
Thompson, Patrick (Norwich N)


Mawhinney, Rt Hon Dr Brian
Thornton, Sir Malcolm


Mellor, Rt Hon David
Townend, John (Bridlington)


Merchant, Piers
Townsend, Cyril D. (Bexl'yh'th)


Mitchell, Andrew (Gedling)
Tracey, Richard






Tredinnick, David
Whittingdale, John


Trend, Michael
Widdecombe, Ann


Trotter, Neville
Wiggin, Sir Jerry


Twinn, Dr Ian
Wilkinson, John


Vaughan, Sir Gerard
Willetts, David


Waldegrave, Rt Hon William
Wilshire, David


Walden, George
Winterton, Mrs Ann (Congleton)


Walker, Bill (N Tayside)
Winterton, Nicholas (Macc'f'ld)


Waller, Gary
Wolfson, Mark


Ward, John
Wood, Timothy


Wardle, Charles (Bexhill)
Yeo, Tim


Waterson, Nigel
Young, Rt Hon Sir George


Watts, John



Wells, Bowen
Tellers for the Noes:


Wheeler, Rt Hon Sir John
Mr. David Lightbown and Mr. Sydney Chapman.


Whitney, Ray

Amendment accordingly negatived.

Main Question put and agreed to.

Resolved,

That this House welcomes the publication of the Government's latest economic forecast, which shows growth continuing at a steady and sustainable rate and inflation remaining within its target range; and congratulates the Government on its economic policies which have laid the foundations for the non-inflationary growth, rising industrial production and falling unemployment that is now being seen.

It being after Ten o'clock, MADAM SPEAKER put the Question which she was directed to put at that hour, pursuant to Standing Order No. 53 (Questions on voting of estimates, &amp;c.).

Orders of the Day — ESTIMATES AND SUPPLEMENTARY ESTIMATES 1994–95

Resolved,

That a further sum, not exceeding £116,027,407,000, be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges for Defence and Civil Services for the year ending on 31st March 1995, as set out in House of Commons Papers Nos. 276, 277, 278 and 447.

Bill ordered to be brought in upon the foregoing Resolution by the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Michael Portillo, Mr. Stephen Dorrell, Sir John Cope and Mr. Anthony Nelson.

Orders of the Day — CONSOLIDATED FUND (APPROPRIATION) BILL

Mr. Stephen Dorrell accordingly presented a Bill to apply certain funds out of the Consolidated Fund to the service of the year ending on 31 March 1995; And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. [Bill 150.]

Orders of the Day — Railway Pensions

The Minister for Public Transport (Mr. Roger Freeman): I beg to move,
That the draft Railway Pensions (Transfer and Miscellaneous Provisions) Order 1994, which was laid before this House on 7th July, be approved.
The House will recall that, when we debated the Railway Pensions (Protection and Designation of Schemes) Order 1994 and the Railways Pension Scheme Order 1994—[Interruption.]

Madam Speaker: Order. Hon. Members who are having conversations must do so outside the Chamber. They must move on quickly. [Interruption.] The doors must be closed, and hon. Members must move out quietly.

Mr. Freeman: The House will recall that, when we debated the Railway Pensions (Protection and Designation of Schemes) Order 1994 and the Railways Pension Scheme Order 1994 on 23 May, I indicated that a further affirmative order would be required to transfer the pension rights and assets in the BR pension scheme to the railways pension scheme and to allocate them between the sections of the RPS.
We have long agreed with the trustees that when the time came to transfer funds from the British Rail pension scheme into new schemes, that would have to be done on an agreed actuarial basis and that, unless the BRPS was in deficit, the accrued rights of all active and pensioner members should be adequately funded. Since that was agreed, we have built on the policy considerably and now have the one railways pension scheme and its sections. The original policy on transfer of funds is safeguarded in the order. The order also has the effect of allocating between the sections any initial surplus that there may be in the scheme—and it is likely that there will be an initial surplus.
As I have said, we have long agreed the broad principles of this order, but, in past month or so, we have had intensive discussions with the trustees. The trustees' officers kept the trustee board members closely informed about that process. We went out formally to consultation on this with the trustees, the employers and the trade unions on 29 June, and laid the order before Parliament on 7 July.
The result of all those consultations was that the Government's proposals were changed in some points of detail as we explored the issues with the trustees and others. The provisions of schedule 11 to the Railways Act 1993 required us to consult the trustees on the provisions in the order relating to the transfer of pension rights and the pension scheme assets, and also the amendment of existing schemes, and further to lay before Parliament copies of the trustees' written comments. I am pleased to tell the House that we reached full agreement with the trustees, and that they do not wish to make any comments. I have placed in the Library a copy of their letter of 6 July confirming that.
The trustees have a fiduciary duty to all members of the scheme, both participating members and pensioners, and also, of course, to the participating employers. Both we and the trustees consider the transfer provisions equitable in the interests of all concerned.
Article 2 of the order has the effect of transferring the existing members of the main BR pension scheme, the BRPS, together with the assets and pension liabilities, into


the railways pension scheme, the RPS, on 1 October—with the BRPS then being wound up. Provision is made for the assets and pension rights to be allocated as appropriate to one or other of the pensioner sections or, in respect of serving staff, into the BR open section. In due course, participants may be moved, under the provisions of the scheme, out of the open section into the new sections of other employers as they are established.
Schedule 1 makes detailed provision for the allocation of assets between sections on a basis which, as I said earlier, we and the trustees consider to be fair both to serving staff—the participants—and to pensioners, existing or deferred. Once assets related to additional voluntary contributions, which are separately invested, and any contributions paid by an employer during the period of the current contribution holiday have been allocated to the appropriate section, the remaining assets will be apportioned between the sections on a "share of fund" basis—that is, in proportion to the respective pension liabilities.
For that purpose, the existing reserves for contribution holidays or reductions will count as pension liabilities of the open section, and the open section liabilities will also take account of any pensionable pay increases agreed on or before 30 September 1994 for implementation before 1 January 1995. The liabilities of the pensioners' sections will include an allowance for future administrative expenses because those expenses in respect of the pensioners' sections can no longer be met out of future contributions. The proportions of any pension rights funded under the Transport Act 1980 are excluded from the calculation of liabilities because Government support payments will be made direct to the relevant section.
Provision is made for the assets to be allocated net of apportionment costs, but those costs are likely to be minimal as BR will reimburse the actuary's costs in carrying out the valuation—the only substantial cost of making the apportionment.
The Government's and the scheme's actuaries have agreed the detailed actuarial assumptions set out in part III of the schedule. We have made provision for the trustees to make an initial allocation of assets, but have specified in the order certain minimum proportionate holdings of certain categories of assets in the final allocation of assets to the pensioners A section, again with the trustees' agreement. That ensures that the investment policy of that section has an appropriate degree of caution from the outset.

Mrs. Gwyneth Dunwoody: The Minister will be aware that railway pensioners have been exceedingly upset by the suggestion that, as part of its current campaign, Railtrack might withhold some of the assets liable to be handed over to the funds. Will he assure us that under no circumstances will Railtrack be in a position to withhold any part of the pension funds or assets due to railwaymen and women and which they have paid for many times over?

Mr. Freeman: I give that assurance. It may help the hon. Lady if I explain the position. There is a substantial pay restructuring reserve of approximately £600 million currently within the pension fund. If an agreement is reached in the present dispute with the signalmen, for example, on new pensionable pay rates before 30 September this year, it will be possible, on the vesting of

the new pension scheme, to allocate a suitable proportion of the total pay restructuring reserve direct to the account of individual signalmen who contribute to the pension fund.
I assure the hon. Lady that Railtrack has no power to withhold the allocation of those funds. If no agreement is reached on improved pensionable pay for the signalmen, the pay restructuring reserve moneys go to the account of the open section of the fund. All that happens is that the signalmen and women who contribute to the British Rail pension fund will not have the specific allocation of funds that would otherwise be their right as at 1 October. The rest of the restructuring reserve will fall into a generality of funds allocated to the open section of the fund, but the money remains within the pension fund.

Mr. Brian Wilson: It would be helpful if the Minister could clarify this matter now to save time later. We are discussing a sum of about £100 million. Am I right in thinking that, if that money does not go to the signalmen because the dispute has not been resolved, when the Minister says that it goes to the "generality" of the fund, he means that it would be divided on a 53:47 per cent. basis like the rest of the surplus in the fund?

Mr. Freeman: The initial surplus as at 1 October, which includes a large measure of the pay restructuring reserve released for allocation to the closed and open sections of the fund, may result in £200 million or £300 million being allocated to the closed fund and a fraction more to the open fund. Those proportions have been fixed by the actuaries, not by the Government or Railtrack. I confirm that the part of the surplus allocated to the open section of the fund must, in due course, be allocated to the various employers in the rail industry, such as Railtrack, the British Railways Board and the franchised train operations. So that surplus will be allocated to specific sections of the pension fund.
If the strike is not resolved and no agreement is reached on higher pensionable pay for signalmen, they must join other members who contribute to the BR pension fund in claiming their right to that surplus in due course, possibly in terms of higher pension payments. There is no question of the money being removed or of Railtrack controlling its use.

Mr. John Heppell: Is there a chance of the date of 30 September being changed so that an extra factor does not enter the signalmen's dispute and the threat of losing money from their pensions is not held over their heads as blackmail?

Mr. Freeman: It is not a question of blackmail. There has long been agreement with the trustees that 1 October was the target date for vesting. I remember an exchange with the hon. Gentleman in Committee on this very subject. The present dispute has arisen since the target date was fixed. I pay tribute to the trustees and their officers, who have been working with the Department to that target date, which is entirely achievable and realistic. It is in the interests of all existing and deferred pensioners within the railway industry that those outstanding difficulties should be resolved.
We have worked extremely hard in the past six months to fulfil our pledge on a guarantee of the pensions in the closed section of the fund, both for the existing and deferred pensioners, and the indefeasible right of all those


who were employed by British Rail on 5 November 1993 to remain in the pension scheme. We have agreed that, on voluntary transfer, there will be a continuous period of employment for purposes of calculating pensions. We have fulfilled all the obligations that my right hon. Friend the Secretary of State and I have given, and we have ended up with a situation with which I think all parties—but represented by the trustees—now agree. To move the date, or even to hold open the prospect of moving the date, would be in the interests of no one.

Mr. Heppell: Is it not a fact that the money that the Minister is talking about removing from the signalmen's pensions will effectively be used to cushion the Government's past guarantees in relation to solvency? The 47 per cent. that was intended for signalmen and drivers under the restructuring schemes will be going into the closed fund. Now it is in the closed fund, and effectively making it more difficult for the Government ever to have to honour that solvency guarantee, because they will have a cushion of approaching £300 million.

Mr. Freeman: I think, with respect, there is a confusion between two points.
Railtrack suggests reforms to the structure of the pay of signalmen and women, consolidating into basic rates of pay allowances that are in general not pensionable. If that happens before the vesting date, there will be an allocation of part of the pay restructuring reserve specifically for the benefit of the signalmen and women.
The rest of the pay restructuring reserve—the rest of the surplus that is agreed by the actuaries—will be allocated between the open and closed sections of the funds, not by Government diktat but by agreement between the two scheme actuaries. There is likely to be a significant surplus for allocation, and that is to the benefit of the pensioners as much as it is of those in the open fund, because they have that much greater a degree of security. That has arisen through good investment management of the fund, not by Government policy.
Schedule 2 makes detailed provision for the allocation of pension rights between the appropriate sections, and for the members with those pension rights to be allocated to the relevant sections.
Article 3 makes drafting amendments to clarify the meaning of the Railway Pensions (Protection and Designation of Schemes) Order 1994, which came into force on 31 May following the undertakings that I gave to the House to reconsider some of the drafting. We have honoured the undertaking that I gave. The amendments, however, do not change the substance of those earlier orders.
Article 4 introduces schedule 3, which amends the trust deed of the BR 1974 pension fund to enable BR staff who are transferred to new employers to remain in certain schemes that are included in that fund, and to enable those schemes to be wound up when appropriate.
Schedule 3 also makes a standard amendment to certain schemes other than the BRPS, for which the trustee company acts at present. That amendment would give the trustee company, and its directors and officers, an indemnity from the participating employers in those schemes against liability for honest mistakes but not wrongdoing, and a power to take out indemnity insurance

similar to the provisions contained in clauses 2E and 2F of the RPS trust. It will formalise the existing indemnity in respect of those schemes which the trustee has from BR.
Article 5 introduces schedule 4, which amends the schedule to the Railways Pension Scheme Order 1994, containing the trust and rules of the RPS. One amendment extends the limit of liability and indemnity in the RPS trust to any liability for breaches of trust transferred from the old trustee to the new. Another provides for the trustee of the RPS to amend the scheme before 1 October 1994, with the consent of the Secretary of State. It is the intention to use that provision to make amendments agreed to between us —inter alia, to clause 8C, which deals with transfers out of the trust, and to rules 13, dealing with surplus assets, 14, dealing with shortfall, and 16, dealing with winding up of the pensioners sections. The trustees' solicitor is currently preparing a deed of amendment for execution once that order has been approved.
The other amendments effected by schedule 4 include clarification as to eligibility to join the scheme and sections of it, and amendments to the model deed of establishment and participation to clarify the continuation for participants in open sections of the RPS of the present BRPS contribution reductions/holiday.
Article 6 introduces schedule 5, which designates sections of the scheme for the purpose of enabling or requiring the payment of Government support contributions under the Transport Act 1980. Article 7 introduces schedule 6, which makes consequential amendments or modifications to existing legislation.
Although we have still to lay a substitution order under section 52B of the 1980 Act varying the timing of Government support payments to the pensioners' sections on the basis already agreed with the trustees, the provisions to be implemented under the order complete the delivery of the undertakings given by the Government. They provide the promised security, protection and peace of mind to BR's existing staff, pensioners and deferred pensioners. They provide no mechanism for the Government to get hold of the funds, as my right hon. Friend the Secretary of State has made clear right from the outset. I hope that the House will support the order.

Mr. Brian Wilson: On one level, the order is non-controversial; on another, it is deeply controversial and raises fundamental issues. It also relates directly to some topical matters that I hope we can explore during the debate, and to which my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) has rightly referred.
It is important to put on record the fact that, every time we debate the future of the railway industry pension fund, there is no consensus in the House, no cosy agreement, no technical agreement that everything is fine and that we are progressing on a bipartisan basis towards satisfactory conclusions. It is the Opposition's view that the railway industry pension fund should never have been interfered with and should not be broken up, and the fact that it is being broken up is entirely a by-product of the unwanted fragmentation of the railways with a view to their privatisation.
We do not believe that there is any public support for those policies. We do not believe that there is any political support for them outside the narrow clique promoting them


within the Conservative party. The reprehensible aspect is that a great deal of concern has been caused to railway pensioners throughout the country, not specifically by the order but by the fact that their pension fund has been tampered with by a Government who have been acting not in the best interests—or indeed, any interests—of those pensioners, but who instead have been driven by the political imperative of fragmentation and privatisation of the railways.
That is the context in which we debate the order. While there will be agreement on the narrow basis of the order and although we may not divide the House—depending on what we hear later—there will be no agreement on the wider framework. Even now, when we believe that we have beaten back the worst intentions of the Tories towards the pension fund, there are still many, many railway pensioners who remember their original intentions only too well. They remember the intention to split the fund in two and transfer half of it to the Treasury, to be set against the public sector borrowing requirement. They remember the intention that there be no increases in benefits to pensioners other than the rate of the retail prices index. We and the railway pensioners remember all that, which is why they are right not to trust the Tories or to take anything that they say at face value.
I have been told, as the Minister has, that the pension fund trustees have no specific objections to the order. I am satisfied that, on purely actuarial grounds it is non-controversial. However, I stress that the context within which it arises is, and will remain, controversial and, in our view, downright wrong.
There is a direct relationship between what we are discussing tonight and the signalmen's dispute, as I shall show later in my speech. One thing that I want to get out of the way and firmly on the record is that if anyone says that previous settlements for railway workers have not taken account of past productivity gains—gains that have already been delivered—that is quite simply an untruth. That means that the Government's position, and therefore Railtrack's position, in the present dispute is based on the same—

Madam Deputy Speaker (Dame Janet Fookes): Order. I am sorry to interrupt the hon. Gentleman, but that is strictly out of order, because it does not relate to the order that is the subject of the debate.

Mr. Wilson: With all respect, I assure you, Madam Deputy Speaker, that it relates very directly to the order, as I will show if I am allowed to develop the argument a little. It relates closely for the reasons already alluded to by my hon. Friends the Members for Crewe and Nantwich and for Nottingham, East (Mr. Heppell), and, indeed, which were acknowledged by the Minister when responding to their interventions. If you will allow me that degree of latitude, Madam Deputy Speaker, I will show you directly how it relates to the order tonight, without any—

Madam Deputy Speaker: Order. I will certainly give the hon. Gentleman a short opportunity to do so, but I have to be convinced.

Mr. Wilson: Among other things, it is my job to convince you, Madam Deputy Speaker. But I place it within that context. There is no question of it not being related to the order.
I shall now quote from a document that was produced by the railway staffs arbitration tribunal, in settlement of the previous national dispute on the railways, on 7 July 1989. The chairman and other members placed on record that
The railway industry has been marked, in the last two years particularly, by very significant improvements in productivity as clearly demonstrated by data in the BRB latest annual report and accounts. Indeed, these productivity improvements have been of such an order that there has been no contribution to cost inflation from the wage bill of the rail industry in the last financial year.
In our view, the exceptional productivity performance of this industry and its workers, and the co-operation displayed by the group involved in this reference towards restructuring, should properly be reflected in some real improvement in basic rates of pay.
In other words, the previous rail dispute was settled specifically by taking account of past productivity gained within the industry.

Madam Deputy Speaker: Order. The hon. Gentleman has now been given the opportunity to demonstrate the connection between what he has been saying and the order. I have to say that he has not demonstrated that connection to me. I am sorry, but he must not continue along those lines.

Mr. Wilson: You are being uncharacteristically ungenerous, Madam Deputy Speaker, in the amount of time allowed to develop an argument. Perhaps I can help you in reaching your decision by referring to the headline in The Independent today, which states:
Railtrack strikers threatened with £50m pension loss".
That is why the two things are related. They are threatened with a £50 million pension loss precisely because of the relationship that I have mentioned.
Initially, the settlement of the dispute was related to the order not by me but by Ministers and Railtrack seeking to tie up the future of the pension fund with the outcome of the signal workers' dispute. I would be delighted to say that there is no relationship between them, but as long as such threats appear, clearly on the basis of a Government briefing, that relationship exists and cannot be said not to.

Madam Deputy Speaker: Order. But we are not debating newspaper reports. We are debating the order, and I see no connection.

Mr. Wilson: I shall try to make headway and take account of what you, Madam Deputy Speaker, have said—

Dr. Keith Hampson: This is irrelevant.

Mr. Wilson: If the hon. Gentleman wanders in late at night and makes sedentary interventions, which, frankly, I think that he would be embarrassed about if he read them the next day in Hansard, that is his concern, but we will try to make serious arguments about serious subjects, which include the future of railway workers' pensions and which seems to me to be rather important.

Mrs. Dunwoody: On a point of order, Madam Deputy Speaker. I would never dream of questioning any ruling from the Chair, as you know. We are in some difficulty. I understand that you will not want to discuss newspaper reports in general, but the difficulty that those of us who represent railwaymen are in is that the two things are directly linked, and they are of great concern to the people who work in the railway industry and feel that the remarks of Railtrack are directly linked to the order.

Mr. Peter Snape: Further to that point of order, Madam Deputy Speaker. Will you also bear it in mind, before you stop my hon. Friend from proceeding along this particular track—if I can use that unfortunate phrase—that other groups of railway workers who were rewarded for productivity deals before the dispute had their pension payments based on those productivity deals, under the terms of the order? The anxiety that my hon. Friend expresses is that the delay in concluding the deal will directly affect the pensions of railway signal workers. Surely that is relevant to the order. It is the reason why most of us are here.

Mr. Peter Bottomley: Further to that point of order, Madam Deputy Speaker. Is it not clear, as my hon. Friend the Minister spelt out, that the date in the order is the end of September or beginning of October and the earnings of signal staff are relevant? However, for those of us who represent travellers on the railways as well as for some people who work on the railways, to go into the full ins and outs of the dispute would, as you have said, be out of order.

Madam Deputy Speaker: I have heard the various points made. I fully understand that there are concerns about the current dispute. There are other ways to raise those concerns. Tonight we must deal with the specific order before us.

Mr. Wilson: I have no difficulty with that ruling. I recognise the distinction that the hon. Member for Eltham (Mr. Bottomley) has made, but it cannot be said that there is no relationship. I have put on record a quotation which I am sure will be hung round the neck of Ministers in other ways. It disproves the idea that settlements of railway disputes have never been based on recognition of past productivity.
I shall now narrow the relationship between the order and the dispute. We have here the threat, ill-defined though it may be, that £50 million will be lost for ever to the railway employees pension fund. More specifically, the threat is that each striking signal worker will personally lose £1,700 in later life as a result of the dispute. That gives a whole new dimension to the order, which is certainly not irrelevant.
The threat arises out of the restructuring of railway workers' grades. The result of regrading employees and increasing their basic salaries is that the pension fund has to pay out more than expected because pension entitlements are based on the final salaries of fund members. I am pleased to see the Minister nod. In order to meet that reality, a substantial kitty was created out of the pension fund surplus. Indeed, the Minister obliged by giving it a more formal name. He called it the pay restructuring reserve.
Various groups of workers who successively have had their terms and conditions restructured have already benefited out of the pay restructuring reserve. The signal and telecom engineers, the permanent way staff—that is the track workers, for the ill-informed who have joined us —the traffic grades—that is the station staff—have all had their terms and conditions restructured. All have received increases in their basic rates of pay. In each case, the employer drew on the fund to meet the extra payments to pensioners as they drew their increased entitlement. In each and every case, past productivity was incorporated into the restructuring of the employees' pay and grades.
That leaves just two categories to be settled in the same way—the drivers, who are not immediately germane to tonight's discussion or the current controversy—and most significantly for the purposes of our discussions tonight and for the travelling public, the signalmen.
I have no doubt that the signalmen's dispute would not have happened and that their pay and conditions would have been restructured in the same way as the signal and telecom engineers, the permanent way staff and the traffic grades if we had not had the lunatic transfer of the role of negotiator from the British Railways Board to Railtrack.
So the signalmen are the people we have in our minds tonight. They have a direct relationship to the order. I understand, and I think that the Minister confirmed, that £600 million is left in that fund. Rather less than one fifth of that amount attaches to signalmen—a little more than £100 million. The threat is that, if agreement is not reached by 30 September, that pay restructuring reserve will effectively close.
The order would break down the fund on a 53:47 basis. Signalmen who are current employees would lose the 47 per cent., which would go to the fund for pensioners. In the words of The Independent and of a Department of Transport and Railtrack briefing, £50 million could be gone for ever. Others may offer advice to the contrary, but that is the relevance of my argument to the debate.
If one divides £50 million by the number of signalmen, it works out at about £1,700 per head. That is the basis of the threat that has been widely reported today in the briefing of the Department of Transport and Railtrack. It states that signalmen are to lose £1,700 in pension entitlements.
Two questions arise directly from that. The first is: is it appropriate for Ministers to associate themselves with such a threat? Will it help to solve the dispute if one threatens people—who in many cases have given their lives to the railway industry and have been employed on low pay—not only with what Ministers or Railtrack will do to them in their attempts to confront and defeat them in the dispute, but with the knowledge that, after they have left the employment of Railtrack, £1,700 will be taken from them? Does that improve the atmosphere of the dispute? I hope that the Minister will agree that it will not, any more than the Government's initial interference in the dispute assisted its settlement.
The second question is also worth asking to place on record one of the possible answers. What do the Government get out of it? Again, my colleagues have been right in the points that they have made. The Government have a vested interest in not achieving a settlement. If a settlement is not reached with signalmen by 30 September, £50 million will revert to the fund for railway pensioners. If a settlement is not reached with drivers, about £280 million will revert to that closed fund. The Government's interest lies in the fact that there would be a £280 million hedge against the solvency guarantee on the pensioners fund, which they so bitterly resisted in the first place.
I am not a conspiracy theorist, so I do not say that the Government are driving the dispute and preventing a settlement because they want £280 million. [Interruption.] The master of sedentary interventions, the hon. Member for Leeds, North-West (Dr. Hampson) must have something tremendously important to say. If he wishes to rise to his feet, he would be welcome to say it, but I suspect that he is limited to monosyllables.

Mr. Nigel Waterson: I take it from the hon. Gentleman's comments that he would like the dispute to end sooner rather than later. If that is so, will he advise his brethren in the RMT union to return to the negotiating table to try to find a solution?

Madam Deputy Speaker: Order. I remind hon. Members of my previous strictures. Comments must be narrowly connected to the order.

Mr. Wilson: I hope that I have proven conclusively, Madam Deputy Speaker, that everything that I said was directly related—

Dr. Hampson: Nonsense.

Madam Deputy Speaker: Order. I am sorry to interrupt the speech of the hon. Member for Cunninghame, North (Mr. Wilson). I do so to say that I deplore seated interventions, from whichever side they come. I frequently say so in the House. I do not want to hear any more from the Conservative Benches.

Mr. Wilson: I am grateful to you, Madam Deputy Speaker. I do not need protection, but the House does, against such foolishness.
On the question of the hon. Member for Eastbourne (Mr. Waterson), of course I want negotiations. I want people to return to the negotiating table tomorrow and I want the minimum of political interference in the dispute. With no political interference, the dispute would not have reached industrial action and it could have been resolved easily. That is why I asked earlier today whether the Government would block the restoration of the:5.7 per cent. offer, which would have been the basis of a settlement if only Ministers had not forced it to be taken off the table.
I do not want to stray wider than the order and so far I have resisted doing so, but I hope that the few hon. Members who have an interest in the matter will recognise that there is something in the order, in the delay, that is of potential benefit to the Government and to the Treasury. The Government may plant stories about a £1,700 threat to individual signal workers and about £50 million being taken out of the pension fund and not put back, but it is a double-edged sword because anyone who knows anything about the matter will be able to examine the circumstances and find out that there is a vested interest concealed in that story—the vested interest of government not to allow the issue to be settled. Other vested interests working in government do not want the dispute to be settled, but they are not germane to tonight's debate.
I do not know what reshuffling is going on, but if the present Secretary of State gets the heave later this week the nation, with one voice, will say "godspeed and good riddance" because all that he has brought to the industry has been fragmentation and chaos and a lowering of morale and investment to the point where the only country in Europe that invests less in its rail network is Finland. A boardroom in Helsinki may want him, but nobody in our public transport industry does.
Let us have none of the double talk. There is no agreement that we should be here tonight, because in the first place we should not be breaking up our railway industry, and if we were not doing so we would not be breaking up the pension fund. If we were not breaking up the pension fund, we would not have caused anguish and despair in the past 18 months to tens of thousands of railway pensioners. The Labour party, rail pensioners,

trade unions and public opinion have forced the Government to back off from their original intentions in respect of the railway pension funds, and for that much we are thankful, but there is no consensus on the primary aims and certainly no consensus on the fact that, once again, the Government seem to be using pensions as a threat to win a dispute.
Instead of doing that, the Government should be settling the dispute, which means people getting around a table, talking about a normal industrial dispute through normal industrial channels and recognising that it involves a retrospective claim that has been recognised as legitimate for every other section of the railway industry.

Mr. Peter Bottomley: That was a pretty pathetic speech. In effect, the hon. Member for Cunninghame, North (Mr. Wilson) was saying was that if the dispute were settled before the end of September, twice as much of the signalmen's pay—£100 million instead of £50 million—would become eligible for pensions.
I strongly object to any party spokesman being sponsored by one of the producer interests. We should be speaking of the fair division of the pension fund now that the railway industry is being divided, but when talking about the interests of the producers—signal staff and others who work in the industry—we should think first of those whom they serve: the travelling public.
My constituents want the order to give the full £100 million benefit to signalling staff because they want to see consolidation of people's earnings for sick pay, for mortgages and for pensions. When the hon. Member for Cunninghame, North spoke of the eligibility for pensions at low pay—pensions are obviously linked to pay--he should have said that the rate of increase of signalling staff's pay eligible for pension purposes now, and twice as much if they agree a modern pay deal, had risen significantly faster than the pay for manual workers.
One of the reasons for that is that signalling staff are on the bridge between being manual workers and modern industrial workers in a modern railway industry. Part of the agreement should have been to move them on to full, effective salary status, rather than the hotch-potch of allowances, overtime rates and shift and roster payments.
For seven years, the RMT, which sponsors 12 hon. Members, has failed, with management, to get a pension deal that doubles up the eligibility for pension.
You were absolutely right, Madam Deputy Speaker, to point out that if we confine our remarks to the pay that is eligible for pensions, and to that date at the end of September when the £50 million would return to the closed part of the fund rather than be eligible, open and available to those who are still working in Railtrack, and also for others working in the railway industry, we will stay in order.
I want everyone working in the railway industry to have modern terms and conditions of employment. That means that pension arrangements should take their full earnings into account. If people argue that the present dispute, which is tangential to this debate, is justified because of the amounts of money involved, I ask them to consider that a top grade member of the signalling staff would be able to have earnings of well over £20,000 a year eligible for pension entitlement.
If the dispute were settled, the average earnings eligible for pension entitlement would be £17,000 a year. Many of the people who travel on the railways, especially those who travel from stations in my constituency, who earn less than £17,000 a year—and certainly less than the £24,000 that top signalling staff receive—believe that the signalling staff should be doing what other people on lower pay have done, and that is ensuring that all their earnings are eligible for pension entitlement so that that entitlement is not made up of a basic pay which is half their average earnings.
When I first entered the industrial relations and personnel field and was working in industrial relations for the British Steel Corporation in the late 1960s, we tried, with the representatives of the people at work, to provide people with what was, in effect, common status.
Hon. Members who are sponsored in this House, apparently sponsored to be silent rather than to speak up, should have told the RMT that they wanted modern conditions and pension arrangements which do not involve leaks to the newspapers about the £50 million that may go missing, as that has been obvious for the past seven years of negotiation.
If the signalling staff are not aware of that, and of the effect of the order, what on earth have their representatives in the RMT being doing and saying to them for the past seven years, let alone for the past seven weeks of this dispute? [Interruption.]
The hon. Member for Holborn and St. Pancras (Mr. Dobson) interrupts from a sedentary position. He is One of those people who should give up his "money for votes" sponsorship by the RMT so that he can feel as free to speak on behalf of the travelling public as spokesmen of other parties are to speak on behalf of those who are supposed to receive the benefit of services in transport or other areas.

Mr. Snape: Will the hon. Gentleman accept from me, as a sponsored Member of the RMT, and as a former railwayman and railway signalman, that the RMT and its sponsorship does not influence my voice or my vote in this place? What the hon. Gentleman is saying is absolutely despicable and totally wrong. Seven years ago, there was no intention of progressing down this particularly barmy path of fragmenting the railway industry. If the hon. Gentleman wishes to participate in these debates late at night, he should do the House the service of reading something about the subject under discussion and read something about the order.

Mr. Bottomley: Other hon. Members will be aware that the order is about the division of the pension fund. It is a consequence of earlier legislation. I would be surprised if the hon. Gentleman had missed his chance of contributing to those debates; I thought that he had contributed to them.
If the hon. Member for West Bromwich, East (Mr. Snape) argues that union sponsorship has different effects from those that I have outlined, I would put it to him that a sensible union would want to have agreed a deal for its members whereby all their earnings were eligible for pensions seven years ago.
Would the hon. Gentleman disagree with that? It would be very surprising if he did.

Mr. Snape: I do not want to drag this out. However, I urge the hon. Gentleman to understand that the matter of salaried status for railway signal workers and others has

been the subject of long and contentious discussions. Of course the RMT would like its signalling staff to be placed on the salaried grades and thereby make their wages and salaries liable to the pension payments under the terms of the order. Understandably, the RMT also sought a lump sum payment for the productivity concessions that had already been made. That is partly what the dispute is about.

Madam Deputy Speaker: Order. I caution the hon. Member for Eltham (Mr. Bottomley) to keep narrowly to the terms of the order, rather than debate the history of the railways and any disputes therein.

Mr. Bottomley: Even leaving aside the past seven years, we seem to have established agreement that getting on to full pensionable earnings makes sense.
During the past seven weeks, when we have been moving toward this draft order coming before the House and when hon. Members have been speaking outside about the rights and wrongs of the dispute, we have had to face two facts. First, the RMT has failed to deliver fully for any of its members modern terms and conditions of employment. That is a tragedy.
Those who consider the past know that one of the reasons why the order, although not contentious in itself, is brought forward in a contentious atmosphere is that the RMT has had a different industrial relations history from that of many others. One has only to read the books to understand that point.
Secondly, the RMT sponsors 12 Members of Parliament, but, to my knowledge, it has not sent a full briefing to the other 630-odd Members of Parliament. In general, its sponsored Members have been almost silent and their communication with the rest of us on this and associated issues has been very slender.
If the union wants to say that it is important for its members to be able to get the pay restructuring reserve in the order, it should ask all hon. Members, "Will you say to the signallers and to other railway staff in your constituency that it is important that the RMT reaches a deal with the employer, so that we do not go past the end of September with the issue unresolved?" I am not talking about the strike, I am talking about how people are paid and—

Madam Deputy Speaker: Order. I am concerned that the hon. Gentleman now seems to be debating who should have said what and to whom. That is not relevant. The hon. Gentleman must deploy his own arguments and allow others to deploy theirs.

Mr. Bottomley: One of the reasons why I shall not get very far in politics and for my not hanging on to my telephone for the next two or three days is that I am not always very good at communicating. Under the heading "Citation and commencement", article 1(b) refers to
articles 2(1) to (10), 6 and 7 on 1st October 1994
and is directly linked to my sentence before you gave me guidance, Madam Deputy Speaker.
All of us should be saying to all signalling staff in our constituencies for their benefit and, for that matter, for the benefit of the travelling public that a deal should be done before the end of September so that the provisions in the statutory instrument are to the benefit of those still working in the railway industry and not just for existing pensioners, which is where the money would go otherwise.
I hope that, by the end of September, the provisions in the order will be available in full measure to those working


in the industry, but I give this warning: if there is a failure by those who are sponsored by the union to help put pressure on the union to reach a deal, the people who will lose are those whose union subscriptions have been paying part of the election expenses of the silent 12, including a potential Labour leader, the Opposition's trade and industry spokesman, their transport spokesman, their employment spokesman and their social security spokesman.

Mrs. Gwyneth Dunwoody: It is not my intention to detain the House very long, but this is a very important subject and I hope that it will be seriously considered, at least for the rest of this short debate.
I do not believe that the Minister is unaware of how tremendously worried railwaymen and railwaywomen are about their pensions. This and other orders are the culmination of much negotiation, frankly great misunderstanding, and certainly great unease. I am a sponsored Member of the RMT, and many railwaymen and railway women in my constituency regularly talk to me about their pension entitlements. They have been exceedingly disturbed by the negotiations, first, because they saw no need for them; secondly, because they were extremely concerned by the Government's attitude to the closed funds; and, thirdly, because they believed and still believe that there is considerable doubt about the veracity of the Government's arguments.
I am afraid that, in a miasma of total disbelief, people who have given their lives to the railway industry will find it very difficult to accept that they should accept what the Minister is proposing. They are deeply worried; they are not at all happy about the fact that what should be a straightforward organisation of their pensions for the future has suddenly become a political football. It upsets them very much that, at every stage of the negotiations on the pension funds that we are discussing, the Government appeared to have been forced into giving way until some kind of agreement was reached with the trustees.
I hope that a solution will be found to the current dispute. I believe that passengers' safety should be paramount, that the House should strive to retain the reliability and good will of railway operators and, above all, that no one inside or outside the industry should be in any doubt that the pension funds of a basic industry are being administered for the good of those who have contributed to them. If those people believe that the Government or their puppet Railtrack may be seeking to use their pension funds as a political football, they will not only feel real dismay and fear; they will feel that they have been betrayed by the House of Commons. I not only understand that attitude, but see it in my day-to-day dealing with railwaymen and women.
I must tell the Minister that there is a long way to go in rebuilding trust between the Government and transport operators. I hope that tonight's debate will not make the gap even wider.

Mr. John Heppell: Let me begin, as I always do in debates about pensions, by declaring that I am a British Rail pensioner—a deferred pensioner. I have

been told on previous occasions that my interest is not significant enough to prevent me from speaking, but it is fairly significant to me, which is why I am speaking.
I was amazed by what was said by the hon. Member for Eltham (Mr. Bottomley). I shall do my best not to refer to it much, but part of the reason for my being a deferred pensioner is the fact that I was made redundant. If the hon. Gentleman's speech and—I think—the mood of the country are anything to go by, in the near future the hon. Gentleman may begin to know what redundancy feels like.
The order affects my income, and that of ordinary pensioners. I do not agree with my hon. Friend the Member for Cunninghame, North (Mr. Wilson) that this is just a product of the fragmentation of British Rail; I think that it is much worse than that. From the beginning, I had no doubt that the Government intended not just to privatise the railways but to get their hands on my pension fund. Their actions showed that. Only my hon. Friend the Member for Cunninghame, North, other Labour Members and pensioners themselves, who rose up in anger at the proposals, stopped the Government taking control of the pension funds.
The Minister was right: the Government did not actually take anything out of the pension funds. What they did was stop putting something in. The payments that they used to make have now ceased and will not be made again. I believe that undertakings have been made to resume them if they are needed, but, effectively, they have ceased.
I lost out. It is no use the Minister's saying that the trustees agreed to the move; they did not. They accepted it because it was the best deal that they could get from Government, but they did not want it or volunteer for it.
The trustees have a narrow role. They have a fiduciary duty and that is why they have had to accept—not agree to —the Government's tabling this order. I am not prepared to accept it, because I recognise that the pension that I had previously was better than the pension deal that I will get now. I am prepared, however, to accept that nothing that I say or do will change the Government's mind and that the deal will not get any better.
I take exception to one thing, to which other hon. Members have also referred. In fighting to protect my pension fund, one of the guarantees that we got—it had to be fought for—from the Government was a solvency guarantee. If the fund looked as if it were in difficulties, the Government would guarantee its solvency. What do I find now?
The Government stepped in as the unions and Railtrack were about to reach a 5.7 per cent. settlement and effectively snookered the deal. It was finished and I thought that it was merely political vindictiveness. I thought that Government were union-bashing again, and wanted to blame the difficulties on all -the left-wingers in the unions. I have sat with many signalmen and there are not many left-wingers among them, as my hon. Friend the Member for West Bromwich, East (Mr. Snape) will confirm, as en ex-signalman. Their political viewpoint is conservative—with a small "c"—and they have commonsense views. If they vote for a strike, it means that there is something radically wrong.
It really annoyed me when I found out that it was not merely dogma that had made the Government interfere in the pay settlement, that there was another reason. Once again, the Government were trying to get some money out of the fund. As before, they were not intending to take something out, but to stop themselves from having to put


something in. If, on 30 September, the fund is distributed, 47 per cent. will go to the closed fund and, effectively, will act as a cushion, which will mean that the Government will not have to pay the solvency guarantee if it is required. The money will have been stolen from the signalmen—possibly from the drivers as well.
I feel annoyed that the Government are using the pension funds to blackmail signalmen and, by doing so, are souring industrial relations and the chances of Railtrack's arriving at a settlement. The Government are using the money not merely for blackmail, but to hold the travelling public to ransom. Without Government interference in the strike, the dispute would have been settled by now and the travelling public would not have been inconvenienced in the way—

Mr. Andrew Rowe (Mid-Kent): I have been present since the beginning of the debate and this is the second time that it has been suggested that it is somehow to the Government's advantage to spin the dispute out until the end of September. Has the hon. Gentleman no idea of the cost to the country, the Government, the travelling public, the businesses of this country and the prosperity of the nation caused by the dispute? The suggestion that the Government should be trying to spin it out for the benefit of some putative robbery of the pension fund seems bizarre.

Mr. Heppell: I should like to think that the hon. Gentleman is right. There is an easy solution—for the Government to tell Railtrack that it can do as it wants and decide on whatever settlement it wants. The answer would be simple, and Railtrack would already have settled because it was in the process of doing so when the Government interfered.
I recognise that what I say tonight will not make any difference to the Minister or to Tory Members. I want to make it clear, and put it on the record, that there is no consensus about what the Government are doing to railwaymen's pensions and my pension. My pension will be worse as a result of what the Government are doing. It is all right for the Minister to shake his head; he will not feel the difficulties in his wallet. I will feel the difficulties.
I am in a privileged position because I do not have to rely on only my railway pension. I will have the opportunity of a pension from here, which is much better than any railwayman's pension will ever be. However, many people, including many of my constituents, will be relying on that pension. I do not want to see them in the same position as the Maxwell pensioners in another 20 years.

Ms Glenda Jackson: I speak as a Member sponsored by the rail drivers' union, the Associated Society of Locomotive Engineers and Firemen. I say to the Minister, as I have had occasion to say to him before, that the peace of mind that he deems with his sanguine carelessness to be part and parcel of the lives of employees and pensioners of the railway industry is not anything other than a hope at present for the members of ASLEF.
The Minister and Tory Members who have spoken tonight in this debate, as in previous debates, have

persisted in attempting to present an image of the British Rail pension as something which the Government have restructured, and made safe and viable.
The Minister knows, as do all hon. Members in the House, that the British Rail pension scheme was one of the best managed, and certainly one of the most productive, schemes in the country. The turmoil came about when the Government decided erroneously, as Opposition Members believe, and as the majority of the British public believe, to restructure—effectively, to break up—the British Rail network in the ideological pursuit of privatisation.
It is that break-up which has caused the concern that is still being felt, certainly by the members of ASLEF, over what they perceive to be unnecessary breakages in what was an efficient and highly productive pension scheme. Nothing that the Minister has said this evening, and nothing in the statutory instrument, will bring about peace of mind for ASLEF members. It is extraordinary that the Minister can depute or, in fact, give a name to a sizeable proportion of the pension fund. It is the pay restructuring fund, £230 million of which is earmarked for the engine drivers' pension scheme. Yet, if no agreement is reached by 1 October, that entire sizeable amount will go into the general fund and be split 53:47. I agree with my hon. Friend the Member for Nottingham, East (Mr. Heppell) that there is a believable case for thinking that the Government wish effectively to drag things out until 1 October because such a sizeable amount in the fund would release them from having to make their first contribution to the pension fund.
I hope that I am wrong in this instance, but experience of the way the Government have handled the restructuring of the pension scheme for the rail industry leads me to believe that I am probably right. If the Minister really wishes the peace of mind to which he constantly alludes to be a reality for employees of the rail industry and pensioners, I urge him to clarify that issue tonight.

Madam Deputy Speaker: Mr. Doug Hoyle.

Mr. Peter Snape: Nearly, Madam Deputy Speaker. My hon. Friend the Member for Warrington, North (Mr. Hoyle) is not here. He is senior to me, anyway.
I had no intention of intervening in this debate. Madam Deputy Speaker, if I had realised that you thought that I was the chairman of the parliamentary Labour party, I would not have done so. I have been provoked into so doing by the deplorable speech of the hon. Member for Eltham (Mr. Bottomley), who displayed all the reasons why he was fired as a Transport Minister some years ago. He displayed a total lack of any knowledge of the subject which we are discussing tonight, and he made a deplorable attack on some of us who are proud of having worked in the railway industry.
I am proud of my background and that of my father, who also worked in the railway industry.
I listened to the scoffs a few moments ago when my hon. Friend the Member for Hampstead and Highgate (Ms Jackson) said that she was sponsored by the Association of Locomotive Engineers and Firemen. I wonder at some Government Members who are prepared to defend some of the things which takes place here and the conduct of their


hon. Friends—particularly with regard to the events of the past week—yet sneer at those of us in the Opposition who are sponsored by industrial trade unions.
Anybody who knows me—including your good self, if I may say so, Madam Deputy Speaker—knows that I am hardly likely to be told either how to speak or how to vote in the House because the National Union of Rail, Maritime and Transport Workers pays a sum of money to my constituency party to see that I am elected from time to time. It has never paid me a penny, any more than ASLEF pays my hon. Friend the Member for Hampstead and Highgate or the RMT pays my hon. Friend the Member for Nottingham, East (Mr. Heppell). Yet we continually suffer jibes during debates such as this, that we are somehow bought and paid for. It is, of course, not true.
There are genuine fears among railway workers about the future of their pensions. Those fears have not been caused by Opposition Members, but have arisen directly from the legislation which has so fragmented the railway industry and, in so doing, has fragmented the pension funds on which those workers will depend in later life.
It is always interesting to listen to the emollient words of the Minister of State, who I hope survives the reported purge this week. It is not for me to rearrange the ornaments along the Government Front Bench, but some of us would welcome the Minister's survival, because he shows a genuine interest in and concern about the future of the railway industry and the pension funds.
I hope he will acknowledge that there are already deep-seated and genuine fears among not just the signalling grades, but all grades within the industry about the future of their pensions. The conduct of the Government and Railtrack during the current dispute has done nothing other than to exacerbate those fears.

Mr. Waterson: Will the hon. Gentleman clarify whether he thinks that the future of the rail industry will be helped or hindered by the current industrial action by the RMT?

Mr. Snape: The straight answer is that the future of the rail industry is in no way helped by the industrial action, and I wish that the hon. Gentleman and some of his hon. Friends would acknowledge that fact. The 5.7 per cent. offer which was made to the signalmen and withdrawn after the intervention of the Secretary of State does not help. [Interruption.] The hon. Gentleman asked me a straight question, and I have given him a straight answer.
The future of the railway industry will not be helped by the intransigent attitude of Ministers, who reacted to the 5.7 per cent. offer by saying that it must be 2.5 per cent., and interfering as they have done to drag on the dispute.
There are various other grades within the industry which have settled and received payment for past productivity, which means that their pension entitlement is obvious, laid down and transparent under the terms of this order. That does not apply to signalling staff, and without being, I hope, unduly partisan—my sympathies are well enough known, and I shall reiterate them tonight—there are real and understandable fears among signalling staff that they are being coerced into a settlement for which many will not vote. If the dispute comes towards a conclusion, signalling staff who voted for a strike in the first place will have to vote on whether any offer is acceptable.
They are enormously concerned that pressure will be put on them under the terms of the order to go back to work and see that the dispute is concluded by 30 September, or they will lose. My hon. Friend the Member for Hampstead and Highgate pointed out that a considerable sum of money —£250 million—is involved in the order, which would be paid in pensions to drivers. That is not an inconsiderable sum by any stretch of the imagination.
So far as signalling staff are concerned, the pension fund will be considerably affected and altered under the provisions of the order.
I hope that the Minister of State will ignore some of the more inflammatory comments made tonight, especially those from the hon. Member for Eltham. I hope that the right hon. Gentleman will say something sympathetic about those who have voted for action. The action has nothing to do with the extreme left. In a poll conducted among 80 per cent. of signalmen, they voted 4:1 for industrial action. Despite the terms of the order and question about the future of their pensions, the signalmen will not vote to return to work until they are satisfied that the efforts they have made are given some recognition.
I hope that the right hon. Gentleman will resist the temptation to make further propaganda and will ensure that the dispute is settled honourably, so that those signalmen too may benefit under the terms of the order, just as other railway grades, who have made equal contributions to the productivity of the industry, have already benefited.

Mr. Wilson: With the leave of the House, I should like to reply on behalf of the Opposition.
We have had a useful debate, not least because it has kicked around some of the current issues. The one contribution that I exempt from that description came from the hon. Member for Eltham (Mr. Bottomley). When the dispute started, I remember taking part in a discussion with him on radio, although we were in separate studios. The following morning, I did another radio interview when a tape of the comments of the hon. Member for Eltham was played. I said that that must have been what he said the night before, but I was told, "No, no. That is what he said this morning."
That demonstrated conclusively that he was reading from exactly the same script. After six weeks, he has managed to learn it off by heart, which is progress, I suppose, in terms of the hon. Gentleman, but it is still the same rubbish and is completely unhelpful in terms of resolving anything.

Dr. Hampson: On a point of order, Madam Deputy Speaker. You might rightly have been irritated by some of us on the Conservative Benches, who were getting extremely irritated by the Opposition Front-Bench spokesman, the hon. Member for Cunninghame, North (Mr.Wilson), who was abusing the terms of the narrow order to score points about the industrial dispute. The hon. Gentleman has now started to do just that again; he is deliberately using the debate to make points about the current dispute. He has just proved that by talking about events in past few weeks.

Madam Deputy Speaker: I think that the hon. Member may safely leave this in my hands.

Mr.Wilson: When the hon. Member grows up, he might make a speech on the subject.
We have demonstrated to your satisfaction, Madam Deputy Speaker, and to that of the Minister, who has some understanding of the matter, that there is a connection between the order and the dispute. The hon. Member for Leeds, North-West (Dr.Hampson) was perfectly right to draw attention to the narrow terms of the order.
I am not accusing the Government of using the pension arrangements as the motivating factor in perpetuating the dispute. The charge is that they are perpetuating the dispute anyway. The secondary charge is that, once they started the nonsense of threatening signal workers with £1,700 losses, as result of £50 million being taken out of their pension entitlements, it was necessary to show that there was another side to the dispute coin. There is a potential gain to the Government if the dispute continues. That is all we have sought to demonstrate.
It is much more important to get the dispute settled than to set out that territory. That means that both sides in politics should step back from the dispute and that the negotiations take place—

Madam Deputy Speaker: Order. I am sorry, but the hon. Gentleman is now referring to the general dispute, and is not linking it, as he did previously, with the order under consideration. I ask him to restrain himself.

Mr.Wilson: Thank you, Madam Deputy Speaker. I am sure that that point has been made.
In the debate, we have proven conclusively that settlements take account retrospectively. We have also proved conclusively that the pension fund of signalmen and employees in other sectors of the railway industry is under threat if settlements are not reached by 30 September. We have linked that threat to the order under consideration.
We have no specific objection to that order, but we have made it absolutely clear that, although we do not contest it, we are not acquiescing with the general principle that has guided what has happened to the railway workers' pension fund. That outcome is a by-product of fragmentation and the potential, but not yet delivered privatisation.
I agree with my hon. Friend the Member for Nottingham, East (Mr. Heppell) that one of the great dilemmas in this issue is whether the Government thought first of railway privatisation and then recognised that, as a by-product, they might get their hands on £4 billion of railway pension fund money, or whether they thought, first, that they would go for the pension fund, but, in order to do that, they would have to break up the railways.
We have won half the battle in that the Government will not directly get their hands on the railway pension fund money. We shall win the other half of the battle, which is to stop them privatising the railways.

Mr. Freeman: May I correct some misapprehensions, so that pensioners and contributing members of the British Rail pension fund are properly informed about this debate?
The hon. Member for Cunninghame, North (Mr. Wilson) raised a number of issues and asked me a number of questions. First, he referred to the change in employment patters and therefore the pension liabilities building up in the pension fund. He is right to say that the number of signalmen has been substantially reduced from

7,600 in 1980 to 4,940 at the end of 1993. But, within the change in the total numbers employed and, therefore, the pension liabilities accruing, a dramatic change in grading has occurred. More signalmen are now on the top grades. In 1980, 22 per cent. of signalmen were on the bottom grade, grade A; by the end of 1993, only 9 per cent. were on grade A. So a reduction in the number of signalmen has been brought about by substantial investment over the past 10 years, resulting in higher grading as signalmen perform more complicated tasks, better pay and higher pension-accruing liabilities. The tragedy is that that has resulted in an increase in basic pay, not in allowances.
Secondly, the hon. Gentleman said that the Government briefed The Independent. The Government have not briefed The Independent and the figures to which the hon. Gentleman referred are not correct. He said that £100 million from the pay restructuring fund might be attributed to the signalmen; I believe that the figure is closer to £30 million. And he obviously reaches the figure of £50 million by dividing that mythical £100 million by two and calculating what might go to the closed fund.

Mr. Wilson: rose—

Mr. Freeman: Let me first answer the hon. Gentleman's point. The £1,700 per head to which he referred is a figment of The Independent's imagination.
The importance for the signalmen is to so restructure their pay that their pension calculation is improved. They should agree with Railtrack the restructuring of their pay and allowances not just for their pensions but for their mortgages, which are calculated on the basis of their basic pay, not their total pay because some of the allowances are not guaranteed.
Finally, the hon. Gentleman asked about the solvency pledge. The Government do not determine the allocation of the surplus. It has been determined by the two actuaries —the scheme actuary and the Government actuary. It has not been Ministers' responsibility to decide that. Simply to allocate part of the initial surplus to the closed fund does not help Government public expenditure because the more money that is allocated to the closed fund, the less is allocated to the open fund and the higher the subsidy required from the franchising director. This allocation was done strictly on the basis of actuarial neutrality.

Mr. Wilson: I cannot pursue all the points that I would wish, but on the £50 million vis-a-vis £1,700, we agreed earlier that £600 million is left in the fund. Will the Minister confirm that the two categories still to be settled out of it are the drivers and the signalmen? If they divide numerically on roughly a 4.5:1 ratio and the figure is not, as I suggested, half of £100 million, which is £50 million, where does the rest of that fund go? My figures, which are the same as those which The Independent arrived at, are logical. There seems to be a large gap in the figures that the Minister suggested.

Mr. Freeman: We have no idea what the drivers may settle for in terms of restructuring their pay and allowances. Those negotiations have been desolatory and have been continuing for a number of years. I hope that they will reach a conclusion. I repeat what I said at the outset of the debate: it has long been held to be a sensible target to create a new joint industry scheme effective from 1 October. The signalmen's strike occurred long after that target was set. If the dispute is settled before 1 October, a


portion of the pay and restructuring reserve can attach itself directly to the earnings of signal men and women, and their pensions will benefit.
That is a statement of fact. If the drivers do not settle, they will have a claim on the generality of the surplus allocated to their own sections in the joint industry scheme. I have spelt out the truth as clearly as I can.
I shall briefly mention the other contributions to the debate. I agree with my hon. Friend the Member for Eltham (Mr. Bottomley) that we want a modern railway industry, with a modern pay structure, because that means that one gets a decent pension scheme, which means that railwaymen and women can look forward to a decent pension in retirement. It also means that they are able to borrow properly from the building societies on the basis of higher basic pay and lower allowances.
The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) spoke about the responsibility for creating fear of exploitation and the loss of assets. That charge cannot be levelled at the Government. The Government have not been creating the fear in the minds of pensioners. I think that other politicians have done so. It certainly does not help the peace of mind of pensioners, who do not understand the details and complexities of the reform of the pension scheme.
The hon. Member for Nottingham, East (Mr. Heppell) spoke about the Transport Act 1980 payments. They will not cease; they will continue. Fifty per cent. of the payments to the closed fund will continue, fifty per cent. will be deferred, with interest attaching to that deferment, and payments will be made in order to honcur the guarantee of RPI indexed pensions. That is an excellent provision for the closed section of the pension scheme.

Mr. Heppell: rose—

Mr. Freeman: Will the hon. Gentleman let me finish now?
Finally, there is no truth in the allegation that the hon. Member for Hampstead and Highgate (Ms Jackson) makes that the Government want to seek to drag out the signalmen's dispute until September, in order to benefit in some unexplained way from the reorganisation of the pension fund. Every strike day costs £10 million. That is a loss to the railway industry and to the country. The sooner that the strike is settled, the better.

Question put and agreed to.

Ordered,
That the draft Railway Pensions (Transfer and Miscellaneous Provisions) Order 1994, which was laid before this House on 7th July, be approved.—[Mr. Freeman.]

Orders of the Day — STATUTORY INSTRUMENTS, &C

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &amp;c.).

Orders of the Day — PESTICIDES

That the draft Pesticides (Maximum Residue Levels in Crops, Food and Feeding Stuffs) Regulations 1994, which were laid before this House on 14th June, be approved.—[Mr. Mackay.]

Question agreed to.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &amp;c.).

Orders of the Day — STONEBRIDGE HOUSING ACTION TRUST

That the draft Stonebridge Housing Action Trust (Area and Constitution) Order 1994, which was laid before this House on 14th June, be approved.—[Mr. Mackay.]

Question agreed to.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &amp;c.).

Orders of the Day — EDUCATION (INTER-AUTHORITY RECOUPMENT)

That the draft Education (Inter-authority Recoupment) Regulations 1994, which were laid before this House on 17th June, be approved.—[Mr. Mackay.]

Question agreed to.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &amp;c.).

Orders of the Day — INSURANCE PREMIUM TAX

That the Insurance Premium Tax (Taxable Insurance Contracts) Order 1994 (S.I., 1994, No. 1698), a copy of which was laid before this House on 30th June, be approved.—[Mr. Mackay.]

Question agreed to.

Orders of the Day — EUROPEAN COMMUNITY DOCUMENTS

Motion made, and Question put forthwith pursuant to Standing Order No. 102(9) (European Standing Committees).

Orders of the Day — POSTAL SERVICES

That this House takes notes of European Community Documents Nos. 7390/92 and 7133/93, relating to the development of the single market for postal services; supports the Government's view that the deregulatory thrust of the Commission's Green Paper should be welcomed, whilst reserving judgement on the proposals to liberalise direct mail and all intra-Community and international mail; and urges the Commission to make progress on the formulation of specific proposals.—[Mr. Mackay.]

Question agreed to.

Orders of the Day — Oldchurch Hospital, Romford

Motion made, and Question proposed, That this House do now adjourn—[Mr. MacKay.]

Sir Michael Neubert: I greatly value the opportunity of raising on the Adjournment the issue of the proposed closure of the accident and emergency unit at Oldchurch hospital in my constituency at Romford. I have lost count of the times that I have had to mention threats to Oldchurch hospital on the Floor of the House before Ministers during the 20 years that I have served here, but once again I find it necessary to do so on behalf of my constituents, and many other people outside my constituency, who have expressed their outright opposition to the latest proposal.
In January, in response to a parliamentary question from me, my right hon. Friend the Member for Peterborough (Dr. Mawhinney) stated that the Secretary of State had received a petition of about 46,000 signatures and about 17,000 pre-printed letters and postcards from members of the public, as well as letters from individuals, and of course hon. Members.
The closure has been condemned by the London borough of Havering, of which Romford is a part, and by the London borough of Barking and Dagenham. It is opposed not only by myself, but my hon. Friend and neighbour the Member for Hornchurch (Mr. Squire), who, as a Minister, has to observe ministerial silence in this place on the subject. It is also opposed by the newly elected hon. Members for Barking (Ms Hodge) and for Dagenham (Ms Church), who I hope may be successful in catching your eye during the debate, Madam Deputy Speaker.
If public consultation is to mean anything, the verdict can be seen only as an emphatic thumbs down. Of course, it is not a Government proposal; its sponsor is the Barking and Havering health authority, which acts as purchaser, aided and abetted by the Havering hospitals trust as provider. My hon. Friend the Minister, whom I welcome and thank for being here tonight, is required to act as arbiter and judge between the local managers of the national health service and the public they are there to serve.
The strategy has now been approved in principle by the North Thames regional health authority and passed to the Secretary of State for decision. The region was the original author of the strategy. It is a tale not of two cities but of two hospitals—Oldchurch hospital in Romford in my constituency and Harold Wood hospital in the Upminster constituency. Throughout the 1980s repeated attempts have been made to close services at Oldchurch in favour of Harold Wood. Capital investment has been largely directed towards Harold Wood, widening the gap between the two hospitals and hastening the day when Oldchurch hospital can be closed, or virtually closed.
That is the point that we have now reached. Once the accident and emergency unit goes, other major specialties will go too and we will effectively have one district general hospital for a district of more than 400,000 people and an above average instance of ill health in parts of the district.
When the proposal for the Havering hospitals trust—note the plural, Madam Deputy Speaker—was brought forward as recently as February 1992 by the previous chairman, it was accepted that there would need to be some rationalisation of services between the two sites, as took

place, for example, in the case of the ear, nose and throat service. My hon. Friend the Member for Hornchurch (Mr. Squire), who is in his place tonight, was with me in expressing concern when we discussed that prospect with the chairman at the time.
At that time it was stated that
no significant change is envisaged in the disposition of accident and emergency
and that
trauma and orthopaedics will be retained on both sites as there is a close clinical link with accident and emergency services.
Yet within weeks of the trust coming into force, A and E was targeted for rationalisation. The two hospitals are now officially described as hot and cold sites and Oldchurch at Romford is the one to get the cold shoulder.
On 9 June 1992, my right hon. Friend the Member for Peterborough (Dr. Mawhinney) wrote to me as follows:
You implied that the unit could be trying to achieve a single site strategy through the back door. Havering hospitals final application for NHS Trust status describes a twin site strategy. If we approve the application, then the NHS Trust will be required to abide by that strategy.
The trust was approved and Oldchurch may be retained as a site, but reduced in size. On present plans, it will be not much more than a hi-tech cottage hospital providing out-patient clinics and elective day surgery.
So much for the background. The community health council, whose resolute stand on the issue of accident and emergency services is the sole safeguard against the strategy being rubber stamped, has conceded a reduction of two A and E units to one, but believes that if there is to be one it should be centralised at Oldchurch. That is the position that I support tonight. It is not the least irony that it is proposed that all A and E services in the district should be centralised at Oldchurch while expansion proceeds at Harold Wood. That compounds the waste of public assets implied by the abandonment of past investment at Oldchurch hospital.
The nub of the argument was set out in my question in April this year:
Should not ease of access by road and proximity to the main centres of population be the overriding factors in determining the location of casualty departments? Does not that consideration point to the continuing need for Oldchurch hospital in that all important life-and-death role?"—[Official Report, 26 April 1994; Vol. 242, c. 93.]
There is also the question of capacity. Other hon. Members may speak of that, particularly my hon. Friend the Member for Ilford, North (Mr. Bendall), who has concerns relating to his local hospital.

Mr. Vivian Bendall: I do, indeed, have concerns. We have a new hospital, the old one having closed approximately a year ago. Our A and E cases increased by 13 cases in the first year. If the A and E unit goes from Oldchurch, it is expected that that figure will increase by a further 25,000 cases in a year, which would mean a further 100 beds to our hospital. That would certainly mean a very large expansion programme on a new hospital that has just been built.

Sir Michael Neubert: I am indebted to my hon. Friend for those figures and for painting a rather wider picture than I can from the vantage point of Barking and Havering health district. We know that the ricochet effect of the closure of A and E services, say, from Bart's eastward out as well as from Oldchurch westward in, could have on other hospitals in the wider area of north-east London.
I return now to the two main considerations that I have highlighted. Romford is at the centre of a strategic road network, and Oldchurch hospital is on a dualled ring road close to the centre of the town. Access is easy from east London and Essex—it has to be, for Romford to have acquired the reputation of a thriving commercial and retail centre. Harold Wood, by contrast, is some miles to the east and reached only by roads which were once and are now not much more than country lanes. Romford is much closer to the densest population, where, on average, accidents are more likely to happen, and to those areas of above-average illness and deprivation, which are a major feature of the district.
As distance and travelling time are of the essence in an emergency, Romford is much the more suitable place to have the only A and E department if there is to be only one. Let me illustrate the point by specific reference to the annual report of the director of public health, 1993, entitled "Bringing Health to Life in Barking and Havering". It states, on page 31:
In Barking and Havering, there are major contrasts between the localities.
It takes as a yardstick mortality from coronary heart disease at ages under 65. The current national average is 58 per 100,000. The district average is 57, but that represents a twofold spread from 39 per 100,000 in one part of the district to 71 per 100,000 in another. The report goes on to point out:
at ward level variations are even sharper,
and cites 97 per 100,000 in Goresbrook compared with 25 per 100,000 at Upminster, which is very comparable with what it calls
more affluent Harold Wood".
The conclusion is clear. If I am under 65, live in the west of the district and suffer a heart attack—I am three or four times more likely to have a heart attack in the west than if I lived in the east of the district—I would want the A and E department to be at Romford rather than Harold 'Wood. The extra travelling time might well prove fatal.
The health authority defends its strategy by all kinds of arguments: from paramedics attending every emergency, to green field helicopter sites, to minor injury units around every other corner. But my constituents are not convinced that that represents the real world, and, unlike the authority, they do not believe in the priority of "timescale financial and logistical reasons" to use the phrase used by the authority in defending its proposal.
My constituents believe that the patient should come first. It would be irresponsible not to put health needs higher, when two recent press reports record Havering hospital trust as bottom of more than 30 authorities for assessing people quickly in the A and E units—now, before two units are reduced to one.
The London ambulance service is the slowest in the country in responding to 999 emergencies. The North Thames regional health authority, in a debate which, it is reported, raised many doubts, approved the strategy in principle, but hedged it about with such an extraordinary number of caveats—I could list them if there were time, as set out in its letter of 21 June to the chief executive of Barking and Havering health authority—that one wonders how approval could be given on such a conditional basis. I hope that my hon. Friend the Minister, for his part, will not be prepared to accept such a flawed strategy. Meantime, he may be interested to know that the region has

apparently given permission for preliminary building work to start at Harold Wood. So much for the process of consultation.

Ms Judith Church: I thank the hon. Member for Romford (Sir M. Neubert) for giving me a moment to speak tonight and for raising this important matter. Although Oldchurch hospital is in his constituency, it is only a few hundred metres from my constituency.
The proposed closure of the accident and emergency unit at Oldchurch hospital is yet another ill-judged decision which has been thrown up by the national health service market that the Government have created. Why is it closing? It is closing to save money. The people of Dagenham need the accident and emergency unit. To get to Harold Wood, which will be the nearest alternative, will take an extra 15 minutes. That is an extra 15 minutes on a Sunday morning when there is little traffic. In peak periods, it will take considerably longer.
Last week, in a two-hour period, 59 people attended the accident and emergency unit at Oldchurch suffering from asthma and other breathing difficulties as a result of the dreadful air pollution over the city. If the accident and emergency unit at Oldchurch hospital closes, people will lose their lives as the ambulances do not get through to Harold Wood.
I hope that the Secretary of State and the Minister will reconsider the proposals when they come through and that this hopelessly ill-judged decision will not be taken. It is a decision against which the people of Dagenham voted significantly in the recent by-election.

Ms Margaret Hodge: I thank the hon. Member for Romford (Sir M. Neubert) for allowing us to participate in the debate. Although Oldchurch hospital is in his constituency, it serves the needs of people from my constituency. I ask the Minister to consider rejecting the proposals that have been put to the Secretary of State for the closure of the accident and emergency departments at Oldchurch hospital.
The Government's reforms have the stated objectives of putting the patients first. I suggest that the basic principle behind the proposals is that we push the patients to the bottom of the pile.
I should like to raise two issues briefly with the Minister. First, the proposals reflect broken trust. When the Havering hospital trust was first established, those responsible for so doing gave an undertaking that they would not proceed with the closure of the A and E department at Oldchurch. Within weeks of attaining trust status, the trust started consulting on the proposals.
Secondly, the trust has stated that the closure of the A and E department will not lead to the closure of the Oldchurch hospital. I do not believe that. If the A and E department of any hospital is closed, that hospital is condemned to a slow and painful death. I should like an assurance from the Minister that, if he accepts the proposals, we shall still have Oldchurch hospital as a district general hospital to serve the needs of the locality.
The closure is predicated on false assumptions. It is predicated on the assumption that GP facilities have improved. They have not. They are among the worst in the country, and none achieve high status. It is predicated on


the assumption that we have a better ambulance service with more paramedics. We all know that the ambulance service is deteriorating. It is predicated on the assumption that we have minor injuries units. None is in place yet.
It is predicated on the assumption that there is a better transport infrastructure for access to Harold Wood. There has not been even an application for planning permission. It is predicated on the assumption that there are sufficient beds in the remaining hospitals to take up the closure of Oldchurch A and E. We know that Harold Wood does not even have enough beds simply to cope with the demands from the A and E department.
No other health authority is attempting to serve the needs of a community of 400,000 people from one site only. That is what North Thames regional health authority proposes to do. It is our view that if the proposals were accepted by the Secretary of State, up to 40,000 accident and emergency patients would have nowhere to go and that those patients would be at the bottom of the pile.

The Parliamentary Under-Secretary of State for Health (Mr. Tom Sackville): I congratulate my hon. Friend the Member for Romford (Sir M. Neubert) on raising this matter, which is clearly of great interest to his constituents and is clearly causing them a great deal of concern. He and the hon. Members for Barking (Ms Hodge) and for Dagenham (Ms Church) have pointed out that these are proposals and that they have been made by the local trust.
I am able to say only a limited amount at this stage. I have listened carefully to what has been said. I am aware that reviews have been undertaken into services in the two hospitals and that the trust has undertaken an evaluation. The conclusion of the trust's review was that both Harold Wood and Oldchurch hospitals would be required for the foreseeable future, but that action and emergency services should be located at Harold Wood. The health authority has arrived at a broadly similar conclusion.
I should like to make some general observations about the provision of accident and emergency services. Obviously, it is vital that all people living in the area should have access to the best A and E services available. We should be looking for first-class services, supported by the necessary back-up. They should deal with the full range of injuries and illnesses at any time, day or night, and should be flexible enough to deal with the characteristic peaks and troughs.
To perform to that high standard, major accident and emergency departments need direct access to a wide range of acute specialty and support services on the same hospital site. Many health service districts have concentrated their A and E services on one site to achieve that. That is in line with the National Audit Office report on A and E which was highly critical of "split site" arrangements and said that they
jeopardised the treatment of patients.
The 1992 report of the national confidential inquiry into perioperative deaths concluded:
The problems caused by the requirement for consultants (and their teams) to work and be on call regularly on more than one NHS site are well known. The use of split sites should be historical.
The message, therefore, is that the best accident and

emergency services come from larger departments. Research shows that the incidence of preventable deaths is reduced by concentrating highly experienced medical and nursing staff on one location.
As my hon. Friend the Member for Romford said, the community health council has apparently accepted the argument for one site and there seems to be—I hesitate to say this, but I think that it is right—a measure of agreement that accident and emergency facilities in the area should be rationalised at one site. Evidently, considerable disagreement exists about which site that should be.
A number of arguments exist for rationalising at the Oldchurch site and a number for rationalising at the Harold Wood site. Among the arguments for Oldchurch would be better access for Dagenham and Barking residents, who are the major users of emergency services. It might be said that the accident and emergency service should be located nearer those residents because of the relative deprivation and the problems of the somewhat underdeveloped primary care services in the area.
Reference has been made to ambulance journey times. I agree that the performance of the London ambulance service has been disappointing compared with other parts of the country, but we have considerable confidence that it will improve. In an age of paramedics—we are aiming soon to have a paramedic on every front-line vehicle—the location of accident and emergency departments, in terms of trauma, is perhaps becoming subsidiary to the location of ambulances and the ability to get an ambulance to the scene.
Again, it has been said that closing Oldchurch A and E would put too much pressure on neighbouring hospitals, including King George and the Newham general. Likewise, the population of Dagenham and Barking seems likely to increase as housing developments in the east Thames corridor get off the ground, not forgetting that cancer and neuroscience specialties are already located at Oldchurch.
The arguments for Harold Wood include, importantly, the fact that changes could be achieved much more quickly on the Harold Wood site because there are far fewer constraints and because the layout of existing buildings at Oldchurch mitigates against development.
There is undoubtedly, for the same reason, the question of difference of cost. There is no doubt that existing facilities at Harold Wood are of a higher standard, and the backlog of maintenance costs is high at Oldchurch.
The specialty reviews considered Oldchurch to be unsuitable for retention of cancer and neuroscience work, and clearly the local health authorities support development of these specialties at Harold Wood. It has been suggested to me that the London ambulance service favours Harold Wood if there is to be a single-site option.
As my hon. Friend the Member for Romford knows, the health authority met formally on 7 April to consider the outcome of its consultation. I understand that the local community health council has asked for further appraisal of the proposed location. At its meeting on 5 May, the health authority decided to stick with the proposals and, as the CHC maintained its opposition, the matter was referred to the regional health authority.
I am told that there was considerable debate at the regional health authority meeting on 13 June, when a decision was taken to support the strategy of centralising services at Harold Wood, but with three qualifications: that appropriate alternative arrangements should be in place


before any closure of A and E facilities; that adequate arrangements should be made and implemented for road access to Harold Wood; and that adequate and appropriate interim arrangements should be in place for the redevelopment phase.
I understand the strength of feeling about this matter and I confirm that if the matter comes to Ministers, what has been said this evening will be taken into account. I have no doubt that I can include my hon. Friends the

Members for Hornchurch (Mr. Squire) and for Ilford, North (Mr. Bendall) in the concern that has been expressed about the matter.
I cannot say more than that at present, as all hon. Members who have spoken will understand, but I recognise that this is a matter of deep concern.

Question put and agreed to.

Adjourned accordingly at eight minutes past Twelve midnight.